It will pay to make plans well ahead for when the end comes

A DEATH in the family is hardly the best time to consider financial options. It makes far more sense and gives peace of mind to pay for a funeral years – possibly decades – before the event is expected.

The average funeral is forecast to cost £4,050 by 2015 (up from £2,857 last year), according to Dignity, one of the largest providers of pre-paid funeral plans.

If other costs – such as a memorial, probate fees and post-funeral refreshments – are added, the overall expense can rise by at least a third.

Not surprisingly, one in 10 finds it difficult to pay. A fifth have to borrow from friends and the same percentage resort to using a credit card. Yet according to YouGov research in 2010, 82 per cent have made no provision for the cost of their funeral.

Instead, it is far better to calmly look at the pre-paid plans on the market and discuss the arrangements your nearest and dearest would like. In the UK, over 860,000 plans have been taken out. In North America, such plans often feature on wedding lists.

Before comparing costs, make some key checks:

n will your money be held in a trust fund which is independent of the funeral provider?

n how much of the cost of a funeral will be covered or does the small print omit essential aspects?

n if paying premiums monthly, could the continuing outlay exceed the cost of a funeral?

n what happens if you relocate abroad?

Most funeral directors offer a plan provider. In case such a firm goes into liquidation, it is important that money passed over goes to an independent trust.

Of course, discuss any such plan with friends and family before making the commitment. There can be duplication where children have initiated a scheme but later find one was already fully paid. There is currently no national centre to check if a plan is in force and therefore lodge details with your solicitor.

Low returns on savings and a knock in the confidence of investment providers have both given a boost to the funeral plan market.

Beware of the ‘guarantee’ that all costs will be met. Most plans will cover for a cremation and may have weasel words that only costs in line with RPI will be met. Certainly crematoriums are now charging significantly more after installing equipment to cut mercury emissions but anyone taking out a plan does not want the uncertainty that further expenses will arise.

For a burial, it is best to separately purchase the plot and then look to a plan for all the other costs.

Despite the terminology, some ‘funeral plans’ do not actually cover the expenses involved as they are term assurance schemes. The latter pay out a lump sum on death which can be written in trust and the beneficiaries can use the money to pay as much of the funeral expenses as possible.

Taking out such a plan may be lower cost but it places the onus on the policyholder to predict the cost of a funeral at an uncertain date in the future.

Age UK is the relatively new name for the combined Age Concern and Help the Aged. Over 180,000 customers have taken out one of their pre-paid funeral plans which are available to those aged 50 years and older (0800 022 3243).

They guarantee to pay all cremation funeral costs which include doctors’ and clergy fees. Funds are held in an independent trust regulated with the Funeral Planning Authority. Three plans are offered costing £2,660, £2,905 and £3,250. A typical difference is whether the hearse only is to be provided, hearse and car or hearse and two cars. Co-operative Funeralcare “fully guarantees” its three set plans with automatic acceptance with no medical questions (0800 023 4710). It will also record any personal wishes, such as choice of hymns. With over 1,100 funeral homes, the plan is portable across the UK.

Payment can be made outright (starting at £2,850) or spread monthly over one, two or three years with the latter method incurring an instalment charge.

With over 70 years of experience in funerals, the Co-op also offers tailor-made plans. The major extras are grave purchase, memorial headstone and temporary grave marker.

Cuna Mutual and the Co-op launched FuneralProtect+ last autumn – a two in one funeral product designed to simplify the funeral process by combining affordable insurance with funeral care (0845 123 7880).

It costs £2 a month for £2,000 cover and when a claim is made the details are passed to a Co-op funeral home. The policy is offered through many building societies and credit unions.

Whilst a policy can be taken out which pays up to £6,000, the individual has to anticipate the eventual cost of the funeral.

Dignity (0800 022 3248) was created in 1994 when the US group SCI (which conducted the funerals of President John Kennedy and Elvis Presley) purchased and merged Plantsbrook Group and the funeral firm Great Southern.

Today it arranges one in eight of all funerals in the UK and is the only undertaker with a stock market listing.

Dignity has three plans with such differences as whether the coffin is mahogany effect, teak effect or oak veneer. The one-off payment is £2,710, £2,955 or £3,290 or can be spread over one, five or even 10 years. If a burial is required, each plan includes an allowance towards the additional expense.

Glasgow-based Golden Charter claims to be the UK’s largest funeral plan provider (0800 833 800) with schemes starting at 43p a day. Third party costs are guaranteed on its three most expensive plans. Their four plans are reduced by £150 before July and range from £1,845 to £3,240 for outright purchase. Acceptance is automatic if a UK resident and aged 50-80 years. If paying monthly, the costs will only be covered after paying in for two years and prior to that Golden Charter will pay over all premiums plus 20 per cent with your family or estate making up the difference.

Perfect Choice (0800 633 5626) is offered by the National Association of Funeral Directors whose members carry out over 80 per cent of all funerals. The three plans are priced at an average £2,465, £2,675 and £3,065 depending upon the area where the funeral director is based.

Costs to third parties are guaranteed in line with RPI but not above unless the funeral is carried out by the firm who originally arranged the plan.

AXA Wealth, trading as Sun Life Direct, offer a life insurance policy which should pay most of the costs of a funeral (0800 904 7674).

Monthly premiums are fixed with guaranteed acceptance without a medical for those aged 50-80 years.

There are two basic forms of cover: with and without ‘disbursements’ (such as all the non-essential costs). As examples, 50-year-olds would pay £15.61 or £23.70 (female) and £16.22 or £24.86 (male) and 60-year-olds £17.65 or £26.88 (female) and £18.87 or £28.71 (male).

However, payments need to continue for the rest of your life or until you reach 90, whichever is earlier. If you stop paying before then, nothing would be paid and the funeral expenses would have to be paid by other means.