Have you paid for your funeral? If you’re still alive and well, the thought probably never crossed your mind. However, organizing your finances to cover your funeral costs so your family doesn’t have to help alleviate their stress once you’re gone.
After all, a typical funeral can cost thousands of dollars and you’ll have to pay for the coffin, cemetery plot, burial or cremation, funeral director fees, transport, death certificate, celebrant or clergy, flowers, newspaper notices, and the wake.
If you want to pay in advance, you have three options to choose from: prepaid funeral plans, funeral bonds, and funeral insurance. Read on to determine which option is the best for you.
Prepaid Funeral Plans
With this option, you pre-pay funeral fees in full or in installments over a period of one to five years. You’ll receive a set contract through which you can allocate your money and also take care of planning your service whilst paying it off.
You can make payments at today’s price, which helps avoid inflation. With an agreed fixed amount, prepaid plans can provide you concrete services after a period of time. Moreover, if you receive the Age Pension, any plan money you invested with a contract or funeral director assigned to it will be exempt from the asset and income test.
However, many traditional funeral homes include heavy premiums or administration fees that can make this option unaffordable—a payment plan can make it less so. You may not be able to get a refund or transfer to a different provider with this type of contract.
If you want full control over your service and reduce the burden on your loved ones, a prepaid funeral plan is for you.
With a funeral bond, you invest money that’s exclusively used to cover your funeral expenses. The bond could be invested through an investment company or directly from a funeral director of your choosing. After your death, your family will be handed the lump sum to organize your service.
Funeral bonds are also exempt from the asset and income test if they’re within the Funeral Bond Allowable Limit, which is currently $13,250 but changes every July 1. Additionally, you can pay in advance and grow your savings over time. You also aren’t locked into a contract, so you can choose your own funeral director.
It is possible your bond could fall behind due to inflation. The price you pay for the service might increase over time, so your family may still have to cover a margin of the cost.
“The bond is for someone who is thinking the time will eventually come and they’ve set some money aside for that, but someone else can figure it out when it’s all said and done,” said Cale Donovan, Co-Founder of Bare Cremation.
Funeral insurance is the most easily accessible option, where you make risk-adjusted monthly payments to the insurance company. Funeral insurance is also appealing in that you don’t have to talk about your death with family members and instead budget for it as an everyday expense. After your passing, your loved ones will get the lump sum of money to organize the service themselves.
With this option, you could end up paying $40,000 for a service through funeral insurance compared to just $6,500 with a prepaid option. “Funerals are a certainty, so any insurance policy has to charge the consumer more than the final cost of the funeral to be profitable,” said Michael Hamilton, the General Manager of Pre-Need at InvoCare. Despite this, if you still want to opt for funeral insurance, go ahead. It’s your choice.
How Will You Pay?
With consideration for your financial situation, choose between prepaid funeral plans, funeral bonds, and funeral insurance to pay for your own funeral. One option may be more financially beneficial to you than others and will make handling these expenses less stressful for your family.
You wish to consult family members or a financial adviser to help you choose the best option.
If you don’t want to leave the burden of paying for your funeral to your loved ones, it’s time to speak with a funeral professional and get your end-of-life plans in order.