There are plenty of ads telling us that we need funeral insurance. If you’ve seen or read one, you may be convinced that the only way to protect your family from a huge financial burden is to take out funeral insurance. But is this actually the case? Do you really need funeral insurance? In this post we’ll examine the pros and cons of funeral insurance and look at why it may not be the best option for everybody.
What Does Funeral Insurance Cover?
When you take out funeral insurance, you choose a level of cover (usually between five and ten thousand dollars), and then pay a monthly or fortnightly premium. When you pass away, a lump sum payment is made to your beneficiary to pay for your funeral and other related expenses (although what the money is actually spent on isn’t regulated in any way). Funeral insurance can be expensive over time, so depending on your age, you could end up paying more in premiums than the value of the funeral insurance cover. Consider the following:
Pros Of Funeral Insurance
- Funeral Insurance is best suited to those over 50 who don’t have life insurance. According to Canstar:
“there is little need for funeral insurance for anyone under the age of 50, because most people under 50 years old will have life insurance. Whether you own a policy personally or through your super fund, life insurance will cover a Death Benefit that provides your family with a lump sum to cover funeral expenses and other expenses when you die.”
- If you have pre-existing conditions, funeral insurance can also be advantageous. Almost all funeral insurance policies provide immediate cover with zero exclusions. However, make sure you read the fine print as there is usually a waiting period of at least 12 months where you will only be covered for accidental death.
- If you are unemployed, funeral insurance can also be a good option.
Cons Of Funeral Insurance
- Premiums will increase as you age and you may struggle to afford them. If you stop paying, you won’t be covered and you won’t receive a refund.
- The premiums you pay over time can add up to more than the cost of a standard funeral, sometimes up to four times as much.
- As we mentioned previously, there is usually a waiting period for death by illness to be covered.
- There is often a delay in the payout of the insurance meaning your family will have to come up with the money for your funeral upfront.
Is Funeral Insurance In Australia Worth It?
It really depends on your personal circumstances. Weigh up the pros and cons, speak to your family and research other options (pre-paid funerals, funeral bonds and high-interest savings accounts). If you do decide funeral insurance is a good idea, make sure you shop around and compare at least 3 quotes for different insurers.You also want to make sure that your funeral insurance policy has the following features:
- Your premiums won’t increase every year
- Your policy covers both death and terminal illness
- Claims are paid out QUICKLY
Ultimately, funeral insurance can give you and your family peace of mind. Just make sure you explore ALL your options before making a final decision. Read more about funeral options on Choice’s website.
If you would like to discuss pre-planning a funeral or funeral bonds, Family Funeral Services can guide you through your options and prepare formal documentation should you wish to go ahead. Talk to Sydney’s best funeral directors – Family Funeral Services – about taking control of your end of life plans.