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What is funeral insurance?

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Funeral insurance may take a number of different forms, each of which is intended to allow you to plan for the future by covering the costs of an inevitable event – your passing away and the need for a fitting funeral to mark that event.

It may be helpful to review the principal methods for insuring that event.

Life insurance

It might be argued that the very concept of life insurance has been around for a very long time. During Greek and Roman times, as far back as 600 BC – according to Wikipedia – “benevolent societies” were created with at least part of their mission to pay for the costs of burying their members.

The concept was developed by similar societies in nineteenth century England where one of the principal aims of early life insurance policies was to cover the cost of a decent burial – effectively, a form of funeral insurance.

Life insurance may be taken out for more or less the same purpose today. A policy provides a guaranteed sum in the event of the insured’s death and this might be used to pay for funeral expenses – though most life insurance policies nowadays are designed to clear any outstanding balance on a mortgage or to provide a lump sum for those left behind.

As a form of funeral insurance, however, life insurance is limited by the fact that the sum assured might not, in the event, cover the costs of the ceremony the deceased had intended.

Settlement of any life insurance claim is also paid to the designated beneficiaries, of course, who are left with decisions about interpreting the deceased’s wishes for the funeral.

Funeral directors

Many funeral directors also offer what is effectively a form of funeral insurance.

You decide on the arrangements you want to be made upon your death and instruct your local firm of funeral directors accordingly. You may pay in advance for the plans you make, not only to ensure that your wishes are carried out, but also in an effort to beat the likely effects of inflation and the rising costs of funeral services.

With this method, however, you may have no protection against the risk of the firm of funeral directors you have chosen from going out of business. If they do, there is every possibility of your forfeiting the money you have paid up front.

Prepaid funeral plans

The modern variant of funeral insurance represents a solution to the shortcomings of both life insurance and a prepayment to your local firm of funeral directors – a prepaid funeral plan.

National providers offer a service whereby you may plan your funeral down to the last detail. This includes the designation of your chosen local firm of funeral directors and, if necessary, help with some of the legal aspects of your passing away – such as wills, probate and powers of attorney.

The advantage of using a national provider for your funeral insurance, however, lies chiefly in the protection of the money you pay in advance. Depending on the method of payment you choose (a single payment, a set number of monthly instalments, or regular monthly payments until your death (or until your 90th birthday), your payment is either invested in a financially secure trust fund or in a whole of life insurance policy.

In this way, you may have no fear of the money you have paid being eroded by inflation, whilst the financial collapse of your initially designated funeral director may be handled simply by diverting the funds to an alternative local firm you choose to nominate.

Finally, with a prepaid funeral plan, the costs of your funeral are guaranteed to be met – even if inflation has increased those costs. That gives you the peace of mind that those you leave behind will not be left with any financial burden associated with your funeral, no matter when you die and how much the costs have increased.

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