Do you have, or have you been thinking about taking out a funeral plan?
Before you do, it is important you know that the Financial Services Compensation Scheme does “not provide protection for individuals who have a funeral plan with a provider that fails”.
Therefore, if your funeral plan provider goes bust, they are not obligated to refund you your money. Which, I imagine, for anyone who currently has a funeral plan is a worrying situation.
A further concern is that the FSCS goes on the say that “whilst funeral plan providers can be regulated by the Financial Conduct Authority (FCA) the vast majority choose to use exemptions available to them which means they are not” (Source: FSCS website).
Therefore, it seems, potentially the majority of funeral plan providers are operating un-regulated and without any financial obligation to their customers should they at any time decide to shut up shop.
Financing your funeral is a very common concern, as often the last thing people want is to leave their loved ones with debts at an already stressful and emotional time.
So, what options do I have?
When it comes to finance planning the alternatives to funeral plans often considered are saving the money or a whole of life insurance.
Saving the money could be a solution. However, unfortunately, none of us knows when our time will end. “The Money Advice Service” state that “recent figures show that a funeral using a funeral director costs on average £4,078”. Saving over £4,000 for many is no easy task. If you choose to save the money, you are gambling on you being around long enough to have saved enough. Additionally, life has a habit of emptying savings accounts. For example, when the boiler goes will this be a higher priority at the time leaving you to have to start saving again?
The alternative solution is a “Whole of Life” insurance policy. This is an insurance policy which never expires, and therefore it does not matter how long you live, the insurance will be there for your loved ones to claim on whenever the inevitable happens.
The amount the policy will pay out is flexible and chosen by the policyholder at the point of purchase. However, the major benefit here when compared to saving the money is that you are often covered for the full amount immediately. It is irrelevant how long the policy has been in place or how many premiums have been paid. Should you pass away at any time, the policy pays out in full and tax-free.
“Whole of Life” insurance policies sometimes involve a health questionnaire. For those where this may not be desirable due to a pre-existing or historical health condition. An alternative is available in the form of an “Over 50’s Whole of Life Insurance” policy.
These policies involve no health questions whatsoever and therefore everyone is guaranteed to be accepted. These policies will also never expire, the only difference here is they often involve a two-year qualification period before a claim in full can be paid. However, often should someone, unfortunately, pass during the first two years many insurers will return the premiums paid in, minimising the financial risk to the insured.
Fundamentally, the biggest difference between “Funeral Plans” and “Whole of Life” insurance policies is that the latter operates in a fully regulated environment governed by the Financial Conduct Authority (FCA) and IS protected by the Financial Services Compensation Scheme (FSCS) meaning your money is better protected in the event of the provider going bust.
Here at Periscope Wealth, we are more than happy to help you. We can provide you with no-obligation quotes on Whole of Life Insurance policies for you to consider so you can make a fully education decision on your best course of action for funeral finance planning.
Please call us free on 0800 131 0444 and speak to one of our highly trained advisers at Periscope Wealth where we will provide no obligation advice with no hard sell guaranteed.