What you need to know
Most funeral directors allow people to ‘prepay’ their funeral, with the cost calculated on the choices that the person selects, such as the style of coffin and the type of service. These funerals are in ‘today’s dollars’ and can be paid as a lump sum or in instalments.
This is important if you have strong cultural reasons for wanting a certain type of funeral or certain features. If you want to pay for the funeral up front but don’t want to be faced with all the details yet, you can pay for the funeral and leave the details for your relatives to decide later.
However, the truth is that it is usually not wise to pay ahead. No matter how attractive the funeral home makes it sound, there are serious drawbacks to pre-paying that the funeral director will not tell you about. For many of the family members of those who have prepaid their funeral, they often misunderstand the contracts, are unaware of them, or find themselves surprised that there are additional fees to be paid.
In addition, many states have inadequate laws protecting funds in pre-need plans, and money invested there could be at risk. There have been some companies have been fined for misleading advertising and aggressive sales tactics, and offering little customer protection for their investment if they wish to change funeral directors.
What are the Pros of prepaid funerals?
- The cost stays the same – Costs are fixed in today’s dollars even if your funeral is not for many years.
- You choose what you want – You can control funeral arrangements if you want to (such as casket, flowers etc).
- Payment options are available – You can pay in instalments over time.
- Cheaper than other funeral products – Can be a lot cheaper than a funeral bond or funeral insurance if you live for another 5-10 years.
What are the risks of prepaid funerals?– For you
- If you cancel, move or change your plan, you may not get your money back.
- In many states, part or all of the interest earned on your account may be withdrawn each year by the seller.
- The cash-out value on an insurance policy is almost always much less than you originally paid.
- The money you pay for funeral arrangements now won’t be available for emergencies later.
- Many insurance companies will not pay the full benefit—or anything at all—during the first few years the premiums are being paid.
- Money spent today may not cover future funeral costs, which could result in the use of cheaper merchandise or requests for additional money.
- Family members may not be aware that funeral costs have been paid, and may pay at a different funeral home.
- If you die out of town and your family employs another funeral home there, it may be difficult to get a refund.
- By the time of your death, the funeral home may have a poor reputation, or be out of business entirely.
Are there safer alternatives?
Where can you go to get more information?Some states require prepaid funerals to be registered. The following state fair trading offices can help you with more information about prepaid funerals.
- NSW – Fair Trading: Contributory and pre-paid funerals
- Queensland – Fair Trading: Funerals
- South Australia – South Australian Government: Planning ahead for a funeral
- Tasmania – Consumer Affairs and Fair Trading
- Victoria – Consumer Affairs: Pre-paid funerals