In many instances when people refer to pre-paid funeral plans what they actually want is funeral insurance (also known as funeral cover or a funeral plan). Also, sometimes this expression is used when people want to make a lump sum investment that can be withdrawn at the time of passing.  The two potential understandings are detailed further below.

Sometimes when people say that want a prepaid funeral plan they just mean they want to organise, in advance, some protection by way of insurance. So then can arrange an insurance where they make regular premium payments and in return a lump sum will be paid at the time of their funeral. This is just standard funeral insurance, you pay a premium based on your age, sex and smoker status and the agreed sum insured is paid out. This is easy to arrange and a number of funeral cover providers are available in New Zealand.

The other interpretation of a pre-paid funeral plan is what others may refer to as a one-off investment or a savings scheme. If people have $8000 – $10000 (give or take) ready cash available now some people look to invest so it is available later. There is nothing wrong with this as long as it is not later needed for something else. It needs to be invested and left.

Some people look to save money on a regular basis with a bank or similar so that, hopefully, when the time comes there is sufficient to pay for the funeral. Again, this is possible but you do need to be very diligent to make this happen, The biggest downside to this method is that you may not be able to save at a rate fast enough, for example if you pass away 3-4 years after starting the savings plan then obviously you would not have enough to pay for the funeral.

The benefit of funeral insurance cover over both of these options is that, after any stand down period, the full cover amount is available to be paid out. So, you get over the issue of the timing of death and it also means you do not need to put aside valuable capital upfront for an eventuality that typically you have no control over the timing of.

Paul Woollams, Funeral Insurance NZ