Funeral Plan Pitfalls

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Funeral Plan Pitfalls

Often a plan will guarantee to pay only the current cost of these plus any increase in line with general price inflation. However, in recent years, these costs have tended to increase much faster than inflation. If this continues to be the case, your estate or relatives could face a bill for a few hundred pounds, despite your having a pre-paid funeral plan. You need to check the small print carefully to see just which costs are guaranteed and which are not.

Many different surveys conducted found that although the literature usually made this clear, funeral directors and middlemen selling the plans often gave confusing and even misleading verbal guidance on this point. You should also check what is included as part of the funeral. For example; a simple funeral might not include a church service - your estate or relatives would have to pay extra if this was to be part of your funeral. The money you pay for the plan is invested. It builds up a fund that the funeral director uses eventually to finance your funeral.

However, pre-paid funeral plans are not technically investments - you are simply deemed to be paying in advance for a service. As such, pre-paid funeral plans do not come within the system of regulation. In fact, there are no laws or regulations governing these plans, so you need to take care when choosing them. The main concern is what happens to the money you pay.

For example, in 1993, £35,000 disappeared from a pre-paid scheme in Huddersfield and 30 elderly people's funeral arrangements were jeopardised. Fortunately, another company stepped in to help.

Next: Safeguards to apply with funeral plans