a funeral plan is one of the best ways to protect against inflation. learn the financial benefits of the choice of 9 million households and the key strategies to save on the average national funeral cost of $1,500. from how to choose a safe funeral company to a revolutionary $100 funeral comparison guide, our experts break down the ins and outs of pre-need funeral plans.
I. Why 9 million households choose a funeral plan
what is a funeral and why has it become a necessity?
a funeral service is a total care system that professionally handles all the necessary funeral procedures (people, goods, vehicles, and administrative procedures) from the time of death to burial when a family member or friend passes away. by signing up for a funeral plan, you're making a smart decision to take the uncertainty out of the process altogether by entrusting the complexities of funeral arrangements to professionals at a time when you're most vulnerable and emotionally distraught.
in recent years, there has been a significant shift in the social perception of funeral services, which were once seen as the preserve of the middle-aged and elderly, but are now seen as essential future planning. According to the Korea Fair Trade Commission, 8.92 million people have subscribed to funeral services as of 2024, heralding the era of the 10 million. Nearly half of all Korean households are managing their future funeral expenses through funeral services.
of particular note is the increase in subscription rates among young people in 2030. This means that funeral services are no longer seen as a specialty product, but as a sensible financial risk management tool that seeks to lock in the present value of unpredictable future expenses (funeral costs) in an aging population and high inflation environment. in addition, in recent years, funeral companies have expanded their services beyond funeral services to a variety of life care platforms such as cruise travel, weddings, and language study, increasing the utilization of the contributions, thus evolving funeral subscriptions into a versatile financial plan that goes beyond simple funeral arrangements.
II. The funeral cost paradox: Why should you buy a pre-need plan sooner rather than later?
the Uncertain Reality of Funeral Costs and the Financial Benefits of Preplanning
funerals come without warning, and the cost is greater than you might think. the average cost of a funeral in Korea is estimated to be between 12 million won and 16.5 million won, which varies greatly depending on the cost of the funeral home, professional staff (funeral directors and assistants), essential supplies (coffin, shroud), vehicle, and choice of burial site (mausoleum, arboretum, etc.). As such, the cost of a funeral can be a significant burden on a family.
a key reason why subscribing to a funeral plan is financially beneficial is itsinflation protection. Typical funeral costs steadily increase by 3% to 5% per year in line with inflation. However, funeral services employ a "price lock" system that provides lifetime service based on the amount contracted at the time of subscription.
because of this, the economic utility of a funeral product to the consumer increases as prices increase over time. it's like buying "inflation insurance" for a fixed future expense. In particular, funeral companies realize "economies of scale" that lower the unit cost of funeral essentials through large-scale procurement, making it structurally more cost-effective than paying for a funeral out of pocket. Given the industry's prediction that the price of funeral products themselves may increase if the recent high inflationary trend continues, buying a funeral plan before prices rise is often recommended as the smartest financial move.
III. Criteria for choosing a safe and reasonable funeral company
since signing up for an inheritance is a long-term contract, you should carefully check the reliability of the company and the structure of the product. check out the three essential checklists for choosing a safe funeral company.
3 checklists to check before signing up
1. check the company's financial stability and deposit protection
since funeral services are prepaid installment transactions that involve paying money in advance over a period of years, the financial stability of the company is the most important criterion. According to the Installment Transaction Act, funeral companies are required to retain (deposit or guarantee) 50% of the deposit paid by the consumer with a bank or mutual association.
before signing up, consumers should make sure that the company is registered with the KFTC and understand the company's asset size and financial strength. If the company goes bankrupt or closes down, consumers can still receive the 50% deposit that is legally guaranteed, or they can switch to another funeral company that has recognized the deposit through the KFTC's "My Funeral As It Is" service.
2. distinguishing between funeral services and funeral insurance
what is commonly referred to as 'funeral insurance' and traditional funeral services are completely different in nature.
a funeral service aims to fix and guarantee the price of the 'service' itself - funeral goods and services - through monthly payments. In contrast, funeral insurance is actually a fixed term life insurance policy, which aims to pay out 'cash' (death benefit) in the event of a funeral that can be used to pay for funeral expenses.
you receive the death benefit whether you pay it in full or not, but it doesn't reflect inflation, so the cash value may decrease over time. Funeral services have a fixed price, but you must pay off any remaining installments, if any, by the time the funeral occurs in order to receive the service. make sure you understand exactly what type of product you're buying so you know the additional costs and reimbursement terms.
3. maturity refund terms and early termination risk for combined products
recently, we've seen an increase in the number of products that combine funeral services with consumer electronics (bundled products). these products often promise a full refund of the purchase price of the combined product at maturity. However, according to a survey by the Korea Consumer Affairs Ministry, 58% of damage relief cases related to combined products are concentrated on overcharging penalties or payment disputes in the event of termination, and 65.2% of companies that promise a refund at maturity are in a state of capital erosion.
therefore, it is essential to clearly distinguish between the subscription fee and the payment for the subscription product, and to periodically check the penalty and refund conditions in case of termination, as well as the financial status of the company. You can withdraw from the subscription within 14 days from the date of receipt of the contract, and you can transfer the contract according to the terms and conditions, but you should also carefully check whether the company has notified the member of the transfer during the transfer process.
IV. Comparison of Sangjo: A Guide to the Rise and Fall of Innovative Models
100-a-month funeral, how to get price and security at the same time
traditional prepaid funeral services require monthly payments of around 30,000 won for several years, so the long-term financial burden and the risk of non-reimbursement of the advance payment in the event of the company's failure have always been a burden for consumers. Innovative postpaid-based products such as Goi 100 Won Funeral Service have emerged to compensate for these shortcomings.
this service allows consumers to pay an extremely small minimum amount, such as 100 won per month, to receive a lifetime guarantee of the reasonable price of the funeral product at the time of signing up (e.g., 2.79 million won), and only pay the remaining amount after the actual funeral occurs. This fundamentally addresses consumers' financial insecurity.
this innovative model dramatically reduces intermediary distribution margins, such as celebrity endorsements and recruiter allowances, making it affordable to reduce the final payment to as little as 50% of the price of traditional prepaid funeral services. it also minimizes the burden on consumers, with minimal down payments, minimal exposure to financial risk for the company, and the ability to cancel without penalty and receive a full refund of their payment. Innovations Post-paid funeral is positioning itself as a new trend in funeral subscriptions that takes the benefits of price locking, but without the financial burden and risk of prepaid.
V. Frequently Asked Questions (FAQ)
Q. do I have to use the service once I sign up for a funeral subscription? can I switch to something else?
A. Yes, there are many ways to utilize the product beyond funeral services. there are products that allow you to receive a full refund of your paid-up principal upon maturity, and depending on the terms and conditions, you may be able to convert your payments into other household services such as cruises, weddings, baby showers, etc. You can also transfer your contract to another person.
Q. if the funeral company goes bust, will all my payments be lost?
A. No. Under the current installment transaction law, the funeral company is required to deposit 50% of the consumer's payment (down payment) with an external institution such as a mutual association or bank. Even if the company goes out of business, the consumer can get this 50% back or switch to another funeral company with full credit for the payment using the 'My Funeral As It Is' service operated by the Korea Fair Trade Commission.
Q. what arrangements can I make in advance to reduce the cost of my funeral, other than funeral services?
A. The most important thing you can do is research and agree on your disposition options (cremation, inurnment, arboretum, etc.) ahead of time, as this is a large part of the cost of a funeral. You can also compare itemized cost lists from funeral homes and funeral services in advance, and consider a family burial or no-burial burial, which is a simplified arrangement with only the essentials, which is a realistic way to save money.
Q. i've signed up for a funeral service, but when should I contact you when a funeral occurs?
A. It's most important to contact your funeral company's 24-hour emergency line immediately after the death, or as soon as the death is confirmed. A professional funeral director will be on hand to provide immediate guidance and support through the process of obtaining a death certificate, making arrangements at the funeral home, and counseling on funeral procedures.
conclusion: Buying a funeral plan is the most financially secure way to prepare for the future
buying a prearranged funeral is more than just preparing for a future funeral; it's a smart financial plan that protects against the huge financial risk of inflation and brings the uncertain cost of a funeral within a range that is predictable at this point in time. Buying ahead of time, especially before prices rise, is the way to maximize your financial benefits.
when choosing a funeral company, we encourage you to carefully compare financial stability, consumer protections, and payment structures (pre-paid, innovative deferred payment, etc.) that fit your financial situation so you can make an informed choice and plan for the future. if you have any more questions about purchasing an annuity, please feel free to leave a comment. we'd be happy to give you more advice so that together we can make an informed choice.