Prepaid Funeral Plans: How To Choose Your Best Option
By: Tom Harries
Jan 09, 2022 | Prepaid Funerals5 min read
Prepaid funerals are an increasingly popular option for end-of-life planning, and could be a good investment for you and your family.
Funerals are expensive in the US — it is not uncommon for a funeral to cost more than $10,000, while the average cost of a funeral is about $7,000. Prepaid funerals might be a worthwhile consideration as part of your end-of-life planning process, helping to plan for this expense and to avoid placing the future financial and emotional burden on family members.
There are several considerations when choosing a prepaid funeral plan, such as cost, payment options and funeral preferences. By taking the time to compare the scope and features of prepaid funeral plans, you can find the most suitable option for your needs today and in the future.
This article looks at prepaid funerals in more detail, including what they are, how they work, and some of the pros and cons, which extend beyond just financial considerations.
What Are Prepaid Funerals?
Prepaid funerals, also sometimes called "pre-need" or "pre-arranged" funerals, are a way to pay for funeral services in advance so you don’t have to worry about costs in the future.
The funeral provider agrees to provide specific services for a fixed price, which you pay for in advance. You can purchase a prepaid funeral plan directly from a funeral home or alternatively through an insurance company or third party provider.
The prepaid funeral plan allows you to lock in a guaranteed price for your funeral and gives you a number of benefits in addition to the guarantee.
Before you prepay for a funeral, it's important to know how these plans work.
How Do Prepaid Funeral Plans Work?
The fundamental element is the prepayment, and this can differ in both method and timing. The main options are:
- Lump sum - pay in one agreed lump sum, which will usually be the cheapest option
- Monthly installments - pay the agreed amount in monthly installments, usually with an interest rate applied or a higher overall price
- Fixed installments until death or certain age (an insurance policy) - pay a sum periodically until reaching a certain age or until passing, with the rate tending to vary based on age at agreement
Plans also vary significantly in terms of what is included, with packages ranging from very basic services to comprehensive arrangements.
Some prepaid funeral plans allow you to choose which funeral home or service you want to use. Other plans offer a list of approved funeral homes in the area. It is important to understand what you have agreed to and what flexibility is allowed, in case you move to another area later in life.
The cost of a prepaid funeral plan depends on several factors, including the type of services desired, the price of the chosen services, and the location where they will be performed. In addition, different funeral homes and providers have particular costs and fees associated with purchasing or canceling their prepaid plans.
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Pros And Cons Of Prepaid Funerals
There are many reasons to purchase a prepaid funeral plan — avoiding the stress of your family making funeral arrangements at an emotionally vulnerable time, and not worrying about how your future funeral costs will be paid for.
The advantage of prepaid funerals is that they usually cost less than funerals planned at the time of death, the prices are locked in when you buy the plan, and they're guaranteed to include the services you selected.
There can be disadvantages as well, including a potential lack of flexibility if family circumstances change, long-term contracts that lock individuals into costly options and less control over the actual funeral service itself. Families should also be aware of hidden or possible fees involved in canceling or modifying paid-for contracts.
Below are some of the most significant advantages and disadvantages of prepaid funeral planning.
Advantages of Prepaid Funeral Planning:
- Peace of mind - funeral planning helps ensure that your final wishes are carried out without delay
- Eases burden on family - plans help ease financial and emotional strain on your family at a time of grief, with decisions and payments already made
- Often cost-efficient - prepaid funerals often work out cheaper, either because of a discounted advance rate, or funeral costs becoming more expensive after time of purchase (the price of funerals has increased almost twice as fast as general prices have in the past three decades)
- Potential tax advantage - payments may be tax-deductible depending on the plan
Disadvantages to Prepaying for Funeral Services:
- Change of mind - plans can be inflexible and you may incur a charge should you change your preferred arrangements
- Change of circumstances - you may be restricted to a particular funeral home or a location, which may cause difficulties should you relocate in the future
- Financial priorities - funeral costs can reach thousands of dollars, money which may be needed more urgently in advance
What Expenses Does A Prepaid Funeral Cover?
It is important to fully understand what expenses a particular prepaid funeral plan covers. In many cases, this will be limited to the cost of the casket and burial plot or cremation and urn. With some plans, you can also cover additional expenses such as flowers, obituary notices and death certificates.
Typical expenses covered by a prepaid funeral plan include:
- The cost of transport from the place of passing
- The cost of cremation or burial
- The cost of a casket or embalming, if desired
- A funeral director's services, which will generally include a meeting to discuss arrangements and a follow-up visit to resolve any questions that arise
In most cases, a prepaid funeral plan won’t cover:
- Transportation of the deceased from out-of-state locations (some providers, like Earth, offer a travel protection add on which means unexpected transportation is covered at no extra cost)
- The costs for personalizing memorial services, including flowers and obituaries (sometimes a sum can be set aside to be spent with the funeral home on the funeral service generally)
At Earth, we specialize in soil transformation services. Soil Transformation, also known as human composting and natural organic reduction, involves the gentle transformation of a body into nutrient-rich soil. Families choose how much soil they’d like returned - to scatter or plant - with the remainder sent to local conservation sites for land restoration purposes.
Whether you need our services soon or you’re planning for the future, we’re here to help.
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