Funeral Plan Safeguards

Life Insurance Quote Line

0800 975 12 10

• Home
• Savings
• Loans
• Mortgages
• Credit Cards
• Investments
• Pensions
• Insurance

Funeral Plan Safeguards

Larger providers nearly always pay your money into a trust fund. This is an important feature. In a trust fund, the money is safe from misuse by the funeral director and safe from the director's creditors if the firm goes bust. This means you can be reasonably certain that the money needed to provide your funeral is secure and will be available when needed. Some smaller providers simply pay the money into a client account.

ou need to check what safeguards there are to protect the money from misuse or seizure by creditors. If there are no safeguards or the position is unclear, avoid the plan. The funeral industry has responded to concerns by setting up its own codes of practice to regulate the sale and management of prepaid plans.

Two rival trade bodies operate these codes: the Funeral Planning Council (FPC) and the National Association of Pre-Paid Funeral Plans (NAPFP). The codes include requirements for customers' pre-payments to be held in a trust fund which is independently administered, e.g., by a bank - and for a formal complaints-handling system. The Funeral Ombudsman Scheme can consider disputes that a member firm has failed to settle.

However, codes of practice are only as good as the monitoring and enforcement systems, and membership of the trade bodies and ombudsman scheme is voluntary. So be wary if you are attracted to a pre-paid funeral plan. If a plan does not guarantee to cover all the costs, it might be better to earmark some of your savings or investments to cover eventual funeral expenses. Although pre-paid funeral plans are not investments as such, they are clearly very similar.

The Financial Services and Markets Act (expected to become law in 2001) contains measures allowing the plans to be brought within the scope of the Financial Services Authority if voluntary regulation is deemed not to be working adequately. Do not confuse pre-paid plans with funeral expenses insurance. The latter is life insurance that on death pays out an amount which is intended to be enough to cover your funeral costs. However, the insurance is not linked to any particular funeral and there is no guarantee that it will be enough to cover the costs.

Funeral expenses insurance is often poor value - because you are usually elderly when you start the plan, the premiums are high and if you live a long time, you can end up paying more for the plan than it will pay out. Prepaid funeral plans are sold through funeral directors and often advertised in magazines aimed at older people. If you do take out a pre-paid funeral plan, don't forget to let your relatives know about it - otherwise they may arrange and pay for a funeral elsewhere, in which case your plan will be wasted.

When choosing a pre-paid funeral plan, be sure to ask: whether the proceeds are paid into a trust fund and who administers it; whether all disbursements are covered, regardless of inflation (and if this applies equally to burial and cremation); whether all incidental expenses are covered; what happens if you choose to pay by installments and die before completion; and whether you can choose your funeral director without restriction.