Retirement Age

Prepaid Funeral Plans Pros and Cons: An Honest Assessment

Last Updated on:
November 24, 2023
Edited By:   Bryan Henry
Advertiser Disclosure
At RetirementAge we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money . The content on this page is accurate as of the posting date; however, some of the offers mentioned may have expired. Terms apply to the offers listed on this page. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any card issuer.

Prepaid funeral plans can be a practical solution to reduce the financial burden for your loved ones after you’re gone. By setting aside money for funeral expenses, you also ensure that your final wishes are taken care of. The concept of prepaid funeral plans has gained popularity as the cost of funerals continues to rise, and individuals look for ways to manage these expenses in advance. However, it’s essential to weigh the pros and cons when considering whether this option is right for you.

Younger woman and older woman sitting down planning for her funeral

On the one hand, prepaid funeral plans offer peace of mind, as you can choose the specific services and details for your funeral, from the casket to the type of flowers. Additionally, by paying in advance, you lock in the costs of funeral expenses, potentially saving your loved ones from the impact of inflation. This thoughtful planning could ease the decision-making process for your family during an already challenging time.

On the other hand, there could be drawbacks to prepaid funeral plans, such as fluctuating costs, funds being tied up, or potential issues with the chosen funeral provider. In the following sections, we will delve deeper into the various aspects of prepaid funeral plans, helping you make an informed decision based on your individual needs and circumstances.

Understanding Prepaid Funeral Plans

When considering your future funeral arrangements, you might have come across the concept of prepaid funeral plans. In essence, a prepaid funeral plan is an agreement between you and a funeral provider, where you pay for your funeral services in advance. This allows you to lock in the current funeral costs and ensure your loved ones won’t have to worry about financing the funeral when the time comes.

There are several advantages to prepaid funeral plans, including:

  • Financial security: By paying for your funeral in advance, you eliminate the risk of rising funeral costs and ensure your funeral arrangements are funded.
  • Peace of mind: Knowing that your funeral expenses won’t burden your loved ones can help reduce stress and worry for both you and your family.
  • Control over funeral arrangements: Prepaid funeral plans allow you to outline your preferences, so your family will be aware of your wishes regarding the funeral specifics.

However, there are also some potential drawbacks:

  • Limited flexibility: If you move or change your mind about the funeral provider, it might be difficult to transfer your prepaid funeral plan to a different provider.
  • Lack of regulation: The prepaid funeral industry may not be well-regulated in some areas, so it’s essential to research your chosen provider carefully.
  • Unexpected costs: There might be additional costs that aren’t covered by your prepaid funeral plan, which your family may have to cover when the time comes.

When looking for a prepaid funeral plan, it’s crucial to compare different funeral providers and their offered packages. Some providers may offer more comprehensive plans, while others may focus on affordability. Take your time and consider the provider’s reputation, the services included in their prepaid funeral packages, and the payment options available to you.

If you decide that a prepaid funeral plan is the right option for you, make sure to discuss your decision with your loved ones and provide them with the necessary information about your chosen funeral provider and plan specifics. Knowing that your funeral arrangements are in place can help create a sense of relief for both you and your family, making an emotionally challenging time a little more manageable.

Benefits of Prepaid Funeral Plans

Financial Advantages

Prepaid funeral plans can help you avoid the increasing costs of funeral expenses. By locking in today’s prices, you’re protecting yourself from future price hikes. This can potentially save your loved ones a significant amount of money. When you choose a payment plan, you’re ensuring that the funds will be available when needed, and you’re protecting your wishes. You can also receive a death benefit through a life insurance policy, which can cover additional expenses.

Non-Monetary Concerns

Aside from financial advantages, prepaid funeral plans can provide peace of mind for you and your family. You’ll be able to specify your preferences, such as the type of service, cremation or burial, and even smaller details like flowers and music. This can relieve your family from the stress of making difficult decisions during an already challenging time. Prepaid plans also ensure your wishes are carried out, so your loved ones can focus on celebrating your life.

Medicaid Planning

Another advantage of prepaid funeral plans is that they can be part of Medicaid planning. By purchasing a funeral plan, you’re converting the assets into an exempt asset, which can help you qualify for Medicaid if your long-term care costs are high. Your funeral expenses are guaranteed, and you’re protecting your assets in case of a sudden illness or financial hardship.

Plan Flexibility

Prepaid funeral plans offer flexibility when it comes to your choices. You have the option of selecting a contract that is either revocable or irrevocable. This means you can change the details of your plan or even transfer it to another funeral home to suit your needs. Furthermore, you can choose from a variety of payment options, such as lump-sum payments, monthly installments, or using bank trusts or savings accounts. This allows you to tailor the financial arrangement to fit your budget, making the process accessible and customizable to your financial situation.

Drawbacks of Prepaid Funeral Plans

Despite offering financial security and peace of mind, prepaid funeral plans also come with potential risks and limitations. In this section, we will discuss some major concerns you might face when considering a prepaid funeral plan.

Financial Risks

Prepaid funeral plans involve locking in today’s prices for funeral services, protecting you against future inflation. However, there might be hidden fees or costs that can arise, increasing the total expense for your family. Moreover, if the funeral home or provider goes out of business or faces financial troubles, the plan could be rendered useless, leaving your family in a difficult situation.

Trust accounts and insurance policies, which are used to fund prepaid funeral plans, may not yield high returns, and, in some cases, the invested amount may not fully cover future funeral costs. Be cautious of potential funeral scams and dishonest service providers who could embezzle funds, as this is another risk to consider.

Contract Concerns

Contracts for prepaid funeral plans can be complex and difficult to understand. Some contracts might not fully detail the services covered, leaving room for additional costs. It’s essential to thoroughly review the contract before signing and to clarify any details with the funeral director.

One aspect to examine is whether the plan includes a revocable or irrevocable trust. A revocable trust can be canceled and refunded, while an irrevocable trust cannot. Payable on Death (POD) accounts are another option for those who prefer more flexibility and control over funds.

Funeral Service Limitations

Prepaid funeral plans can limit your choices when it comes to funeral services and arrangements. Specific items such as the casket or urn, venue, and other service elements might be dictated by the contract, leaving little room for personalization or alternatives.

Furthermore, changes in your preferences over time or disputes among family members can make a prepaid plan more restrictive than helpful. Always discuss your wishes with your loved ones and consider including them in the decision-making process.

Plan Portability

The portability of prepaid funeral plans can be limited if you move to another city or state. Not all funeral providers are willing to accept or transfer a prepaid plan from another funeral home, which can create complications and financial stress for your family.

Before purchasing a prepaid funeral plan, inquire about the plan’s portability and potential costs associated with transferring the plan to a different funeral home or location. Knowing your options beforehand can help you make a well-informed decision.

Choosing a Prepaid Funeral Plan

When considering a prepaid funeral plan, it is essential to weigh the pros and cons to determine if it is the right option for you. Prepaid funeral plans can provide peace of mind, as they allow you to organize and pay for your funeral arrangements in advance, alleviating the financial and emotional burden for your loved ones.

First, evaluate the different types of prepaid funeral plans available. Some common options include:

  • Whole life insurance: A policy that covers the cost of your funeral, usually paid in a lump sum or installments.
  • Term life insurance: Similar to whole life insurance but only provides coverage for a specific period.
  • Burial insurance: Also known as final expense insurance, it covers the cost of burial expenses such as the plot, headstone, and burial service.
  • Prepaid trust: A legal agreement that holds your funds, specifically designated for your funeral expenses.

When selecting a plan, consider the following factors:

  1. Price: Compare funeral prices, such as average funeral costs and payment options, to ensure you choose a plan that fits within your budget.
  2. Flexibility: Look for a plan that allows customization according to your preferences, such as choosing between burial or cremation and the details of the funeral service.
  3. Portability: Ensure that your plan can be transferred if you move or change funeral providers.
  4. Inflation protection: Inquire whether the plan offers protection against rising costs due to inflation, often referred to as a “guaranteed plan.”

Keep in mind that prepaid funeral plans may have pros and cons. Some advantages of prepaid funeral plans include financial savings for your loved ones, control over your funeral arrangements, and protection against inflation. However, there are potential downsides to be aware of:

  • Loss of funds: If the funeral provider goes out of business or if you decide to cancel the plan, you might not be able to fully recover your investment.
  • Limited coverage: Some plans may not cover all expenses, such as transportation, medical expenses, taxes, or obituary fees.

By carefully considering these factors and discussing your choice with a trusted financial advisor or attorney, you can make an informed decision about which prepaid funeral plan best suits your needs and preferences.


In summary, prepaid funeral plans have their pros and cons, and it’s essential for you to weigh them carefully before making a decision. On the positive side, prepaid funeral plans allow you to lock in today’s prices, ensuring you pay less, given that funeral costs are on the rise. Additionally, they can alleviate the financial burden on your loved ones during a difficult time and help ensure that your final wishes are carried out.

However, there are also downsides to consider. In some cases, plans may not be transferrable or refundable, potentially causing issues if you change your mind or relocate. Also, if the funeral home goes out of business, you might be left with no recourse to recover your invested money. It’s crucial to review the terms and conditions of any contract carefully before signing up for a prepaid funeral plan.

Here’s a quick outline of the pros and cons:


  • Lock in current prices
  • Reduce financial burden on loved ones
  • Ensure final wishes are carried out


  • May not be transferrable or refundable
  • Depend on the funeral home’s stability

When exploring your options, it’s essential to compare various prepaid funeral plans to find one that best suits your needs and budget. Ultimately, the choice comes down to your personal preferences and financial situation. By understanding the advantages and disadvantages, you can make an informed decision about whether a prepaid funeral plan is right for you and your family.

Written By:
Debbie Wheeland