Legal & General Funeral Plan.
We’re a bit confused about the Legal & General Funeral Plan. On the one hand “Covers the cost of a traditional cremation funeral, as specified in the plan, after two years” but on the other “The funeral value starts at £3,145 and is reviewed each year in line with inflation, which is measured against the Retail Prices Index (RPI).” In some ways this is better than a standard Over 50s Plan with no index linking at all. But the index linking is expensive, so costs go up more as you get older and can afford less! Worse, the benefits are linked to normal price inflation. The cost of funerals has risen many times faster than standard inflation, so the gap between payout and funeral cost is likely to grow quite fast. Though not as fast as with most Over 50s plans.
So what they are saying seems to be that the Legal & General Funeral Plan:
a) is guaranteed to pay for the funeral after 2 years. BUT:
b) There will be a larger and larger gap between the cost of the funeral and the value of the plan as funeral inflation is running MUCH faster than Retail Prices Inflation. “Reassurance that your Insured Funeral Plan is keeping pace with inflation” they say. But it is not going to keep pace with funeral cost inflation and after a few years there will be a large gap which your family will have to fund.
c) Worse: the Plan has no cash in value at any time. (Our advice: never touch this sort of plan – you could lose the lot if you hit hard times!)
d) Premiums will increase fairly rapidly, so the older and poorer you get, the more you will have to pay!
Sorry Legal & General, we still prefer traditional full funded funeral plans to this funeral plan from you. But is is an improvement over some other insured plans. The marketing literature seems to us to be implying guarantees that just are not there. We’re really surprised that this type of plan gets away – consistently – with adverts of this type. And the Legal & General one is much fairer than many! It does do what it says on the tin, as long as you read it very carefully and understand it too!
It doesn’t make sense to us – it either guarantees a funeral or it doesn’t and this seems to guarantee the funeral costs only of you die in precisely 2 years, and not at any other time.
We also don’t like the fact that premiums increase 50% faster than RPI, so whilst the benefits only increase in line with general inflation, the costs increase nearly as fast as funeral inflation – but don’t cover it. For our money, you would be far better off with a proper prepaid funeral plan paid off over 10 years, and building up value along the way.
Some more of their blurb on the Legal & General Funeral Plan.
We couldn’t possibly suggest that this is rather stretching the facts. But maybe it has been updated since our initial review ;-).
“If you want to know your funeral costs are covered, the Insured Funeral Plan could be just what you’re looking for. It covers the cost of a traditional cremation funeral, helping to ease the financial burden on your family at a difficult time.
The funeral plan value is reviewed each year in line with the Retail Prices Index (RPI). This helps the plan keeppace with inflation. Your premiums will also be reviewed each year and will increase by the change in RPI multiplied by 1.5.
The Insured Funeral Plan at a glance (their words, not ours!):
- Guaranteed acceptance with no medical or health assessment when you apply.
- Covers the cost of a traditional cremation funeral, as specified in the plan, after two years.
- Reassurance that your Insured Funeral Plan is keeping pace with inflation.
How the Legal & General Funeral Plan Works.
- When you take out an Insured Funeral Plan you agree to ‘charge’ your plan to Dignity. Charge is the legal term, which means the funeral value is paid directly to Dignity.
- The funeral value starts at £3,145 and is reviewed each year in line with inflation, which is measured against the Retail Prices Index (RPI). This ensures the Insured Funeral Plan will always keep up with inflation rises year on year. What is RPI and how does it work?
- Your premiums will be reviewed each year and will increase by the change in RPI multiplied by 1.5.“