It can be really hard to know where to start when you’re trying to be proactive and plan your end-of-life choices. The TV ads can make it all sound a little too good to be true, and you don’t want to be pushed into something you’re not quite ready for.
The good news? There are plenty of options, and it’s an achievement in itself that you’re looking into it! We’ve seen first hand the positive difference that can come from pre-planning – especially for those loved ones left behind.
There are four main options we tend to talk about with those that come to see us: a pre-arranged funeral, funeral insurance, a prepaid funeral, and a funeral bond.
Pre-arranging your funeral – for those wanting to take the first step; but not wanting a financial commitment
A pre-arrangement allows someone to decide and express their wishes for when they pass away. This is an important first step in funeral planning – they can provide their loved ones with a ‘guide’ for how they want their life to be remembered, which will likely alleviate some of the pressure loved ones feel in making such big decisions when the time comes.
A pre-arrangement requires no financial commitment at the time of making the arrangement. Instead, funeral costs will be quoted and charged around the time the funeral occurs.
A pre-arrangement can be made with or without the help of a funeral director, though it can be helpful to have an expert point out some options or ideas you may not have come across. Remember to keep your instructions safe or pass them onto your loved ones for safekeeping. It’s also a good idea to leave a copy of your wishes with your preferred funeral director if you have one.
If you need a starting point, we have “Planning Ahead” guides we can post out to you, just contact us.
Funeral insurance – for those who like rolling cover, like contents or car insurance
Funeral insurance operates in a similar way to other insurances – car, home, contents etc. and is most likely the ad you’ve seen on TV. The person who takes out the insurance specifies the nominated amount they wish to be covered for, and so long as premiums are continually paid over time, that lump sum is paid to the estate upon that person’s passing (as long as there are no other issues).
You don’t specify what you actually want for your funeral, and you don’t select your preferred funeral director, though of course, you can do this of your own volition – it’s just not part of the insurance process.
It’s flexible in the sense that usually the insurance payout can be used however the person’s nominated beneficiary sees fit – for travel costs, legal fees or for funeral costs, as designed. But be careful with this one, as there are some big risks:
- You can get caught out paying more in insurance premiums than the cost of a funeral in the first place.
- If you miss payment of a premium, your cover can be cancelled, meaning premiums paid up until that point don’t actually contribute towards the cost of your funeral. This is especially an issue if you have already been paying for funeral insurance for a number of years. Check out this Financial Review article for more.
Funeral bond – for those who want a growing savings fund for their funeral
Think of a funeral bond like a hybrid between a term deposit and a savings account – the account holder can deposit big or small amounts of money over time and even if they stop making payments, the deposited funds are still there in their name. The bond is designed to be a secure investment whose value grows over time. Funeral costs are still quoted and charged around the time of the funeral (as with the above options).
It doesn’t have the flexibility that funeral insurance has – monies from a funeral bond must be used to contribute towards the cost of the funeral, and you are limited in terms of the amount you can invest, but it does have its advantages. You can invest small, regular amounts, and you don’t run the same risk of having all of your payments be for nothing. A funeral bond can also help people maximise their pension entitlements, as invested monies are not currently deemed part of the asset test for pension purposes. We can advise you of the current limits.
Prepaid funeral – for those wanting to lock in their funeral at today’s prices
A prepaid funeral is a contract entered into with a funeral director, which details your funeral choices and which funeral director you would like to look after you when the time comes.
Importantly, this option provides that the costs of the funeral are locked in at today’s prices, so even if funeral costs were to rise in the future, you have secured your specified funeral at the agreed price; you know the full extent of your financial commitment now. You can also maximise your pension entitlements by going through with a prepaid funeral.
This option is probably the highest level of pre-planning – you pay for your funeral now and you outline exactly what funeral service you will receive – easing the financial and emotional burden on your loved ones in the future.
Not all funeral directors offer prepaid plans, and there may be some exclusions – burial fees are often excluded as these costs vary enormously.
So what next?
The team at Compassionate Funerals Queensland are on hand to help you discuss which option(s) might be best for you or your loved one. We don’t believe in pushing you into one choice or another. We aim to work with you, understanding your needs and level of comfort with each of the choices, because there is a lot to consider. Contact us if you have any questions, or you would like to take the next step in pre-planning – and well done for coming this far!