weighing up your options: which is best for you?
If you are over 50, you might be in two minds about your age. On one hand, you may feel that you are slowing down a bit (and might have a few more aches and pains than before!). On the other, over 50s are actually in a great position. You’ve been working for a long time so hopefully have less money worries than when you were younger, and retirement is finally in sight. You also have a wealth of life experiences under your belt that have made you stronger and wiser.
However, there’s no denying that you’re not getting any younger, so you should have got to thinking about how to look after your family long term- maybe when you are no longer here. These days, there are so many options for what to do with your money after you pass away that it can seem daunting. Should you take a risk on investing and hope it pays off? take out a funeral plan? do you really need life insurance?
We’ve broken down the three most common products below, which should hopefully give you a clearer understanding of which one would be most suited for you and your needs.
Over 50s Life Cover
Life insurance for over 50s is an easy and affordable way of helping pay for your funeral. You make monthly payments (that are guaranteed not to increase over time), and when you pass away the plan pays out a pre-determined amount of money, which could be used to help your loved ones pay for your funeral.
You can either choose how much you would like to pay each month, and this amount combined with your age will determine your payout, or you can choose how much you’d like to leave, and pay the monthly premium needed for that amount.
It’s regulated by the Financial Conduct Authority (FCA) so your money is protected, you are guaranteed your payout when the inevitable happens, and monthly premiums can be extremely low; often below £10.
When you pass away, the payout will go to the person (or people) you named as the beneficiary. Whilst they can do what they like with the money, you can let them know how you’d like it to be used- many people intend for it to be put towards their funeral costs, or to help out with bills and expenses.
A great benefit of a life insurance policy is that you can request for the payout to go into a trust, so that it is not counted as part of your estate and therefore is not subject to inheritance tax. These funds will also be available quicker as they do not have to go through the usual probate and can be used to pay for any immediate expenses such as funeral costs.
Alternatively, with some over 50s policies you can arrange for the payout to go directly to an allocated funeral director when you die, meaning the money will be taken off the final bill.
Some things to consider
It’s important to remember that with life insurance, you could potentially pay in more than you get back, depending on how long you live. If you wish to leave a larger sum of money to your loved ones, you may wish to take out a traditional life insurance policy, rather than one tailored to over 50’s. However, this would require health checks, and would carry larger monthly premiums.
Funeral Insurance
Funeral insurance is very similar to over 50s life insurance; also regulated by the FCA, a funeral insurance policy will pay out a fixed sum towards the cost of your funeral when you pass away. The only differences are that you can take out funeral insurance before you turn 50, and policies often come with a free will kit, as the payout is specifically intended to contribute towards your funeral costs.
Similarly to life insurance, you can request for the payout to go into a trust, so that it is not counted as part of your estate and therefore is not subject to inheritance tax. You can also state at the time of opening a trust that you would like the money to go to a certain place, for example your funeral director of choice. This way, the funds will be available faster as they do not have to go through the usual probate.
Some things to consider
If you miss any payments, you may not be entitled to a payout at the end of the policy. It’s important to always read the terms and conditions carefully to ensure you fully understand the circumstances in which a policy may not pay out.
Funeral Plan
A fifth of all UK funerals are now paid for in advance with a funeral plan. A funeral plan is different from the above two products in that you lay out your funeral arrangements when you take out the plan. You may have personal wishes, such as song choices or outfit requests for your guests, which will all get recorded by your plan provider. Then, when your time comes, the funeral director will be aware of all your choices, and your loved ones will be able to add any extra touches of their own.
The biggest benefit of a funeral plan is that it freezes the cost of what your funeral would be at today’s prices. For example, if you plan a funeral that costs £3,000 today, but by the time you die that same funeral would cost £2,000 more, your family wouldn’t be asked to pay the difference.
There are different packages to suit individual budgets and the scale of the send off you’d like. They range from basic plans that cover the essentials, to more comprehensive packages that cover any little extras you may want. You can generally expect all plans to at least cover;
- A coffin and hearse.
- Care of the body.
- Transport of the body to the funeral home.
- A minister to conduct the ceremony.
- Visiting the body in a chapel of rest.
There are also two different ways to pay for a funeral plan; if someone has the money available, they may choose to pay it all in one go. Alternatively, they can pay a monthly premium.
Some things to consider
It’s important to take out a funeral plan with a FPA registered provider. The Funeral Planning Authority ensure customers get the funeral they paid for when it is needed. They also help customers who have a complaint about any funeral plan provider and will attempt to solve matters on your behalf.
There have recently been reports of rogue funeral directors offering funeral plans and not delivering on what was agreed, or often charging loved ones additional costs they weren’t expecting. This has given funeral plans a bad name in the media, but these providers were not registered with the FPA.
It’s also crucial that you and your loved ones understand what your plan does not cover, and that there may be additional costs that will have to be covered. For example, embalming of the body, flowers and catering for the wake are not generally covered by funeral plans, unless you have chosen a plan with a disbursement allowance.
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