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Prepaid Funeral Plans

Find out all about prepaid funeral plans, what they offer and how they compare to other options here with Savvy.  

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, updated on September 18th, 2023       

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Prepaid funeral plans

Planning your final farewell may be a difficult topic to think about, but for many people having a prepaid funeral plan brings peace of mind. They offer you the opportunity to meticulously plan and pay for your funeral in advance. This ensures your exact wishes are known, and your loved ones are relieved of the financial burden of making difficult decisions during a time of mourning. 

In this Savvy guide to funeral financing, we explore prepaid funeral plans, helping you understand how they work, their potential benefits, and what other alternatives you have for financing your final hurrah. Whilst we don’t offer comparisons between funeral plans or funeral insurance, we do offer free comparisons between different life insurance policies which can also cover funeral expenses. 

What is a prepaid funeral plan, and how do they work?

A prepaid funeral plan is a financial arrangement that allows an individual to plan and pay for their funeral in advance. This ensures that their wishes are known and respected, and eliminates the financial burden on loved ones, who otherwise may have to pay the costs of a funeral up front. Such plans are particularly popular with seniors in Australia

How do they work? 

Prepaid funeral plans involve an agreement between an individual and a particular funeral director. The funeral director agrees to take care of all funeral arrangements in return for prepayment of the agreed cost for those services. 

Steps involved in organising a prepaid funeral: 

  1. Select your funeral director: Begin by choosing a funeral director. This is the person responsible for organising your funeral according to your wishes when the time comes.
  2. Personalise your funeral plan: Work closely with your selected provider to customise the details of your funeral. This involves specifying elements like the type of service you’d like to have, whether you’d prefer to be buried or cremated, your choice of casket or urn, and any special requests you have in mind for the service you request.
  3. Agree on the cost: The funeral director will calculate the total price for your chosen funeral, based on today’s prices. Once you agree on these costs, they are locked in, safeguarding your plan against future inflation.
  4. Decide on payment options: Determine how you want to pay for your prepaid funeral plan. You typically have the choice of making a single lump-sum payment upfront, or opting for a more flexible arrangement, which often involves an initial deposit followed by regular monthly instalments.
  5. The funeral director carries out your wishes: When you do pass away, all your relatives have to do is contact the funeral director, who will arrange for your prepaid funeral plan to be carried out. This will relieve your family of any financial burden, or having to guess what type of service you would have wanted.

How do I know the money I prepay for my funeral is safe?

The funds you set aside for your prepaid funeral must be securely managed under funeral legislation which is in operation in several states in Australia:  

  • New South Wales
  • Queensland
  • South Australia
  • Victoria
  • Tasmania
  • Western Australia

These states have legislation requiring funeral directors to deposit prepaid funeral contributions into government-regulated funeral accounts. This legal oversight ensures that your money is protected, just in case the funeral director you choose goes out of business before carrying out your funeral wishes. 

However, there is less legal protection available in the Northern Territory and the Australian Capital Territory, so extra caution is needed if you live in these territories.  

What are the benefits of a prepaid funeral plan?

There are many benefits offered by a prepaid funeral plan. These include:  

  • Tailored plans: These plans allow you to customise your funeral according to your own preferences, ensuring your loved ones won't have to make challenging decisions during an emotional time.
  • Locked-in price: When you choose a prepaid funeral plan, you agree on the cost of your funeral at today's prices, effectively locking in the price. This protects you from future inflation and rising funeral costs.
  • Payment flexibility: Prepaid funeral plans offer flexibility in payment options. You can choose to pay in full upfront, or opt for a payment plan, for example, an initial 30% deposit followed by monthly instalments over 36 months.
  • Simple application: Applying for a prepaid funeral plan is straightforward, with minimal paperwork and no medical checks required.
  • No effect on your aged pension and entitlements: Seniors can benefit from prepaid funerals as they are exempt from asset tests, helping them maintain their current age pension benefits.

Prepaid funeral plans offer financial security and peace of mind, allowing individuals to have control over their final arrangements while sparing their families an unexpected expense. 

How does a prepaid funeral plan compare with funeral insurance and life insurance?

There’s many differences between prepaid funeral plans, funeral insurance, and life insurance with funeral cover. Here are the main differences: 

Prepaid Funeral Plan Funeral Insurance Life insurance with funeral cover

Purpose

Pay for your pre-planned funeral in advance

May cover the cost of the funeral, plus family funeral insurance is available 

Provides broader financial protection for one policyholder 

Premiums

One-off payment or monthly instalments

Regular premiums (monthly/annually)

Regular premiums (monthly/annually)

Coverage

Fixed price funeral based on your chosen plan

Choice of coverage amount from $3,000 up to $15,000

Varies, from $100,000 up to more than $1M

Relative cost

Dependent on the funeral plan chosen, paid for in instalments

Average cost around $20-$60 a month

More expensive than funeral insurance alone, but with greater benefits

Waiting period

No waiting period involved

A 12-month waiting period for full coverage, during which time only accidental death covered

Immediate coverage for accidental death, possibly 12 months for full cover

Age restrictions

No age restrictions

Limited by age (usually 40-80)

Available across a wide age range capped at around aged 65

Health assessment required?

No medical required

No medical required

May require a medical assessment or report from doctor

Inflation protection

Price locked in to counter inflation

Coverage amount may not keep up with inflation

Benefit amount can keep pace with inflation

Regulatory protection?

Funds held securely in a registered funeral fund in most states

Regulated by financial authority ASIC 

Regulated by financial authority ASIC 

Frequently asked questions about prepaid funeral plans

What happens if my funeral director goes out of business?

If your funeral plan company faces financial issues, your funds are secure since they're held independently, not by the funeral director. In such cases, if the funeral director goes out of business, you can transfer your prepaid funeral plan to another funeral director without losing your money. 

Can I take out a prepaid funeral plan on behalf of my parents?

Yes, you can take out a prepaid funeral plan on behalf of your parents. Many providers allow family members to purchase plans for their parents. This can be especially beneficial if your parents are elderly or you want to ease their financial burden. Just ensure the funeral plan details accurately reflect your parents' wishes for their funeral arrangements, and are made with their knowledge and consent.   

Is standalone funeral insurance better than a prepaid funeral plan?

This will depend on your current age and financial situation. Funeral insurance can end up costing you more than your agreed benefit amount, particularly if you hold a policy for a long period of time. A prepaid funeral plan protects you against the rising costs associated with inflation, and the total cost you’ll pay is agreed in advance. 

Can I cash in the money I’ve prepaid for a funeral plan if I change my mind?

No, generally you can't cash in the money you've prepaid for a funeral plan if you change your mind. Prepaid funeral plans are designed for covering funeral expenses, and the funds are typically held securely by an independent institution until they are needed for your funeral. These funds cannot be easily withdrawn or cashed in for other purposes. 

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Disclaimer:

Savvy is partnered with Compare Club Australia Pty Ltd (AFS representative number 001279036) of Alternative Media Pty Ltd (AFS License number 486326) to provide readers with a variety of life insurance policies to compare. Savvy earns a commission from Compare Club each time a customer buys a life insurance policy via our website. We don’t arrange for products to be purchased from these brands directly, as all purchases are conducted via Compare Club.

Savvy does not compare all life insurance policies or providers currently operating in the market. Any advice presented above or on other pages is general in nature and doesn’t consider your personal or business objectives, needs or finances. It’s always important to consider whether advice is suitable for you before purchasing an insurance policy.

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Prepaid funeral plans

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