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Thread: Funeral policy or Savings account?

  1. #1
    Senior Member
    Join Date
    Dec 2010

    Funeral policy or Savings account?

    Apologies if this has been posted in wrong forum.

    My mother has recently been commenting about making financial arrangements for the future, especially costs of funeral! Looking for general viewpoints and thoughts in general.

    Question at this moment is which way to go?

    She has seen the adverts on TV regarding pay ‘£XX per month and your funeral costs will be fully paid’ or words to that effect. (I am sure these policies are never that simple!)

    Or, does she squirrel away set amount each month into savings account, ISA or such, specifically for this purpose?

    We’re asking the above as we have friends who had taken out one of the funeral policies. He has paid into this for over 10 years and has obviously paid much more into the policy than it is actually worth-as we’re sure you know, if he stopped paying into the policy now, he would receive nothing! Indeed, because of this fact, he has had to take out a 2nd, separate policy as the figure guaranteed from 1st policy would not cover funeral costs at todays prices! The reason why he took out the 1st policy is, at that time, he had just gone through major surgery, a triple heart bypass, and obviously did not want his wife burdened with funeral costs.

    My mother is 68 years of age and whilst she does have health problems, she is not at deaths door! As for finances, she receives state pension, pension credit and guarantee and attendance allowance.

    This subject is not the easiest to discuss at the best of times, but is a topic which needs addressing. Extremely grateful to those for reading and moreso, for those who are able to discuss, comment and advise.

  2. #2
    Senior Member
    Join Date
    Dec 2013
    This is probably more a question for an independent financial advisor (ideally one you're paying for their advice, not one providing advice in the hope of commission) or one of the financially orientated forums. The Money Saving Expert forums may well be a good place to discuss funeral costs cover and alternative options, as there are posters there who are far more informed on financial matters than I am.

    No insurance provider takes on business intending to lose money. The whole idea of funeral costs cover is that, on average, people pay in more than they receive from the policy. Obviously, there will be winners and losers, as with any financial product based on risk.

    You identify the emotional levers to take out and continue to pay for these policies accurately. People take them out hoping to lift the burdens on their loved ones when they are no more - or in the hope of receiving more than the bare minimum arrangements provided by the local authority for those who die with insufficient means to pay for a funeral and who have nobody else to pay for them. They are often taken out at a time when they are especially aware of their own mortality and maybe do not expect to live for that much longer. However, that's just the time when cover might be at its most expensive - if the insurer takes the same view of life expectancy, the premium will be that much higher to mitigate the insurance company's risk.

    Unfortunately, these policies often fail to keep pace with inflation, which means that the policy might turn out to be inadequate for the hoped for arrangements. As your friend found, this may mean a top-up policy or alternative arrangements are needed to cover the shortfall.

    Keeping paying for any form of cover "because I'll lose everything if I stop paying" is the wrong way to look at it. Your friend really needs to take a fresh view on the situation from now, looking at whether it's is it better to keep paying on the policies he has, or to scrap them and make alternative arrangements. There would be short term risk in doing this, in that any non-insurance alternative would not provide the same cover in the short term, but hopefully the facts that he's already paid in more than the benefit available and that he's already needed a top up policy to cover his chosen arrangements will help him realise he might have made a poor choice.

    My feeling would be that most people are better off with a straightforward long term savings vehicle with modest risk. An ISA would be an obvious choice, though someone on means-tested benefits like Pension Credit is unlikely to have enough income to pay income tax, so would be exempt from interest on other forms of savings account anyway. If you know you can keep up the payments, there are some reasonable deals around on "regular saver" accounts.

    I haven't kept up with National Savings, so I don't know whether any of their products would be a good choice. Index-linked savings certificates used to be a good choice for those trying to protect a sum against inflation, but they were taken off the market a few years ago when the base rate dropped to 0.5% and I don't believe they've returned to the market.

    As I said, somewhere like Money Saving Expert may well produce some worthwhile discussion.

  3. #3
    Senior Member Kodiak's Avatar
    Join Date
    Mar 2013
    Thurso, Caithness, Scotland
    My personal Opinion is that for me what I would do is to go to a Good Funeral Director. Most Funeral Directors have plans where you pay so much per Week/Month.

    Unlike an Life insurance where you are required to pay until you die and if you stop paying you lose everything. Also as they say in the insurance adverts you can pay in more than what you get back on these type of policies.

    A Funeral Director will work out a plan for a Particular Service you like and then let you pay for it in advance in payments you can afford. When it is paid you stop paying and then when the time comes they will provide the service that you have paid for with no extra charges.

    As I said this is the way I have gone and this might not be suitable for all, but for me it was the perfect answer.
    Deep into that darkness peering, long I stood there, wondering, fearing, doubting, dreaming dreams no mortal ever dared to dream before.
    Edgar Allen Poe

  4. #4
    Senior Member flowerangelx's Avatar
    Join Date
    Feb 2013
    I'm just wondering if where you live do a City Funeral?

    We have just been organising my grandmothers funeral and she's ended up having a Nottingham City Funeral - at the cost of around £2,500. She also had a funeral policy and the amount has covered it with some spare.

  5. #5
    Senior Member
    Join Date
    Nov 2010
    My Mother had one and when she died the funeral directors took it all out of my hands and everything was arranged, so I had no worries.
    I took one out and paid for it over 5 years, all paid now so next of kin will also have no worries.

  6. #6
    Senior Member
    Join Date
    Dec 2010
    Great, many thanks for your input.

    Have also looked at the AGE UK website who also do this pre-payment plan for funerals, 3 levels of service, 3 prices. Payable in lump sum or over a period.

    Now 1 last question (for the more...ahem...mature members)...Given the info in my 1st post, what would you recommend? Monthly insurance policy (where she may pay more into than get out), simple savings account to save so much per month or a pre-payment such as the 1 from Age UK (I know that if this option is taken, and there are outstanding payments to be made at such time of (God forbid)mother passing, then they still ask for any outstanding payment to cover the full cost of funeral option).

    I know there are potential pros and cons with each but, am asking what your preferences would be and possible reasoning behind.

    Again, MT.

  7. #7
    Senior Member
    Join Date
    Dec 2010
    If you can afford it, why not take out a pre-payment agreement with a funeral director, and also take out a small life insurance policy, but plan to stop paying when the funeral is, for example, 80% paid for?

  8. #8
    Senior Member Lighttouch's Avatar
    Join Date
    Mar 2011
    It's all at the Coop - now!

    My mum was only just thinking about a funeral plan for my dad - he's 89. She's not considering any funeral plans for herself as she feels fine at 85!

    At least if you start paying into a plan it freezes the price.

  9. #9
    My husband and I have paid upfront the full lump sum with the co op we chose the coffins ,what we wanted as regards the type of service and where.we paid for everything. Nothing for our family to sort out we even paid for x number of cars
    .then a few weeks later and the gentleman had suggested we join the D. I V I club we got some cash back.the prices go up with funerals as we all know but once you have paid that is get the funeral you have paid for.hope this is helpful.

  10. #10
    Senior Member
    Join Date
    Dec 2010
    Hi again, And a massive thank you for all your replies and experiences.

    I think the way to go will be a pre-payment plan, whether this is paid in 1 lump sum/over 3 - 5 years. Ath least this way, my mother will be able to choose her own service and plan.

    Again, will have a look at all types, including, co-op, age UK and similar organisations.

    Has opened my eyes to the options that are available!

    Many Thanks to all.

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