A prepaid funeral plan allows you to pay for the essential elements of a funeral in advance, either for yourself or someone else. If a prepaid plan is in place when you die, your loved ones will have less to organise and less to pay towards your funeral. Plans can usually be taken out by anyone aged over 18, although some providers say you need to be at least 50 to buy one. If you want to pay for a plan with monthly instalments, there may also be an upper age limit (often around 80), after which you'd need to pay upfront. Plans typically cover some of the costs of a funeral, for example, the coffin and a hearse - but in most cases, not all costs. Precisely what will be covered is an essential consideration in deciding which plan to sign up for and, as we'll cover in this article, a prepaid funeral plan is not the right thing for everyone.

Since July 2022, the Financial Conduct Authority (FCA) has regulated prepaid funeral plans. 

This means:

• Your money's safe with an authorised provider, as you'll either get a funeral or a refund - even if the provider goes bust. That's because funerals paid for in instalments must go ahead even if you die before paying the final instalment. The only exception is if you die within 24 months of purchasing the plan, in which case the provider won't be required to pay for your funeral but must give a full refund.

• Some funeral plan providers will pay out for a funeral if you die within two years of taking out your plan, as long as you've paid at least the first 12 months of instalments and your payments are up to date.

• The Financial Services Compensation Scheme (FSCS) protects you if your plan provider fails. The FSCS can either ensure your funeral contract is carried out as planned or pay cash compensation.

• The new rules also mean, if you have a complaint against a funeral plan provider or intermediary, you can refer it to the Financial Ombudsman Service. (If the issue happened before 29th July 2022, you'd still be able to refer it to the ombudsman service, but only if the firm was previously registered with the Funeral Planning Authority).

There are now 26 funeral plan providers authorised by the FCA  covering 1.6 million plans. If you already have a funeral plan, it is essential to check if the provider is authorised by the Financial Conduct Authority (FCA) at register.fca.org.uk. If a firm is not registered, it won't be allowed to sell new funeral plans after 29th July 2022 and you shouldn't buy a new plan from them. If you already have a plan with a firm that is not authorised, find out from them what is happening to your plan. Your options include receiving a refund or transferring your plan to another provider. 

What is included

It is unusual for a plan to include burial plot burial fees, the cost of the headstone, order of service sheets, embalming and the cost of flowers and catering at the wake. 

A typical plan will usually cover the costs of transporting the body to the funeral directors' location from the place of death, preparing the body for visits at the chapel of rest, a coffin, hearse and funeral director staff to attend the funeral and an allowance towards burial/cremation costs. More expensive plans will also include the ministers or celebrant fees, limousines for mourners and a guarantee that crematorium fees will be covered. 

Pros and cons of prepaid funeral plans

The most obvious reason for taking one out is to try and help your family with the cost of your funeral. However, as mentioned earlier, even the most expensive plans probably won't cover every single expense, or you may be limited in your choices, such as the style of coffin. 

If you've got a funeral plan, do tell your family. It might be helpful to put together all the paperwork and information they will need when you pass away – including your will, your funeral plan, and details of your bank and savings accounts. 

An alternative option is to put money in a savings account so that the money is earmarked. Of course, the downside is that inflation could eat into the value. Funeral plans are protected against inflation - even if costs rise, you'll still get the funeral you've paid for. The other disadvantage is that nothing will prevent you from accessing the savings, meaning they may end up being spent before you pass away. 

Whether a funeral plan is the right thing for you and which type of plan to take are all personal decisions that will be affected by your circumstances. You should avoid putting yourself into financial difficulty to pay the instalments, and in many cases, if you end up defaulting, what has been paid may well be lost. Part of the decision about whether to take out a plan, may come down to how much you think you'll leave in your estate or the extent to which you think your family or loved ones might struggle if the costs (or at least some of them) were not covered. It also depends on how long you think you might live. The younger you are, the more difficult it can be to justify, which is one of the reasons why, although people can take out  certain plans as young as 18, they are often restricted to or only sold and marketed to people who are over 50. 

There are many things to contemplate when you start to plan for what will happen after you have gone, and your funeral is just one of them. Not everyone has the chance to prepare for this, but most of us will have the chance think about, and plan for how we want our life celebrated and the costs of doing so covered. 

Whatever approach you take - thinking carefully about whether a prepaid funeral plan is right for you and if so. which one might be best, then making your decisions based on this, after doing your research, is one way of giving you real peace of mind for the future.