Funeral plans vs funeral insurance

April 27, 2022 

None of us want to leave our families with not only a big funeral bill to pay but the stress of having to plan the goodbye you wanted. Like lots of other people, you may be starting to think about ways to cover the cost of your funeral. 

There are a few different types of funeral cover out there, but which is right for you? We’ve put together some information about prepaid funeral plans and funeral insurance to help you learn more about these two very different services. 

What is a prepaid funeral plan?

When you buy a funeral plan, you’re paying in advance for your funeral. This means your family won’t have anything further to pay when the time comes.  

A prepaid plan lets you organise your goodbye exactly the way you want. Whether that’s a burial, cremation or direct cremation. You’re able to choose the level of service that suits your needs and budget, and make notes about any special requests you have, like a certain song being played. 

Unlike funeral insurance, funeral plans don’t pay out a cash lump sum to your family when you pass. The invoice for the funeral is sent to the funeral plan provider who takes care of everything. 

The main benefit of prepaid funeral plans is that they protect you from rising funeral costs. You pay today’s price for your funeral, and no matter how much the costs rise you won’t have to pay any more. 

Funeral plans mean that you can protect your loved ones from the stress of having to plan and pay for a funeral. It means that they can have time and space to support each other knowing that everything is taken care of, and just celebrate your life the way you wanted. 

Read more about choosing a prepaid funeral plan provider

What is funeral insurance? 

Funeral insurance is a type of insurance that pays out a lump sum to your loved ones when you pass away. It’s similar to insuring your home or car but with a few key differences:

1. You pay a premium which is usually a monthly figure that goes towards a lump sum. The lump sum is paid out on death to the family

2. The lump sum is paid out on death to the family

3. The monthly premiums that you pay are likely to increase each year and you keep paying them until you die

4. If you stop paying, you lose all your monthly premiums

5. The lump sum that’s paid out varies depending on which funeral insurance plan you opt for

6. The money isn’t ring-fenced for funeral costs. It can be used for pretty much any cost – it’s up to your family what they choose to spend it on

Funeral insurance can be a gamble. The fixed lump sum that pays out once a person has passed away is not directly related to the amount of money paid in. 

This means that if a person ends up living longer, they may end up paying much more into the policy than the amount that’s paid out once they’ve died. It is also true that if you don’t live very long, the policy can pay out more than you’ve put in. 

As it’s funeral insurance and not a prepaid funeral plan, your family will still have to arrange a funeral once the lump sum has been paid out. This adds another task for family members at an incredibly difficult time.

Funeral plan vs funeral insurance

What should I choose? It really depends on what your reason is for having funeral cover. 

If you’re wanting your loved ones to have the option of what to do with money when you pass, then funeral insurance may be for you. As they’ll get a lump sum they are able to decide whether to put it towards the funeral or to help towards other costs. 

If you want to protect your family from unexpected costs, unnecessary stress and uncertainty about your wishes, a prepaid funeral plan is likely the best choice for you. 

One of the main differences between funeral insurance and a funeral plan is that you have no protection against rising costs and your family could be left with a lump sum that doesn’t cover the cost of your funeral. 

Plus, with a funeral plan there’s no claim period so your family can start putting arrangements in place straight away. With funeral insurance, they unfortunately will have to wait until the claim is processed. 

Read more about five reasons to choose a prepaid funeral plan

What are the other main differences between funeral plans and funeral insurance?

Can I pay monthly with both?

Yes. For both options you can choose to spread the cost and pay in monthly instalments. However, if you want to pay in full you can only do this with a funeral plan. 

With One Life, we get that everyone has different financial circumstances. You can pay in one lump sum if that suits you, or in manageable monthly amounts between  6 and 240 months. And, if you do choose to pay in instalments you’ll be covered by The One Life 60 Day Promise meaning if you pass away after 60 days all your services will be covered and loved ones will have nothing more to pay. 

How long will I have to pay for? 

Unlike funeral insurance, when you opt for a prepaid funeral plan you only pay for the payment term you have chosen. There’s a fixed amount that you pay and once it’s all paid off, you are all sorted and there’s nothing more for you to pay out. 

As mentioned earlier, when you choose a One Life plan and choose to pay by monthly instalments after 60 days – no matter how much you have paid – you’ll be fully covered for your plan. 

With funeral insurance, you’ll be paying into this every month until you die and premiums rise each year.

Want to know more about prepaid funeral plans? Speak to our team today

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