Funeral insurance is a form of Life Insurance designed to pay to your family, a lump sum benefit on your death to contribute towards the costs of your funeral and other associated expenses.
You can choose a coverage from $5000 up to $30000 with some insurers. However, most policies are only issued up to $15,000. Some insurers offer a percentage of your premiums refunded every 3 years as a loyalty reward.
Funeral insurance differs from a pre-paid funeral contract, in that you are not saving for the cost of your funeral, but buying insurance to meet those costs at some future date. Payments are made at weekly, fortnightly or monthly intervals for a fixed amount of cover which will be paid to your beneficiary when you die. However, if your policy falls into arrears (normally by 60 days), your policy will be cancelled without any refund of premiums.
Insurance premiums usually increase with your age and as you don’t know when you are going to die, you must consider whether you will still be able to afford funeral insurance over the next 10, 20 or more years. It is wise to check with your intended insurer, what your premiums might be at the ages of 70, 75 and 80 etc. Remember, as with any form of insurance, if you stop paying premiums within the terms of your policy, it may be cancelled and your money may not be refunded.
It is also important to understand that it is possible, depending on the length of time, that you may be paying more in funeral premiums than what your family will receive as the final benefit. Other policies offer fixed premiums and/or a ceiling on the total premiums payable e.g. some limit the total premiums payable to the amount of cover provided.
Different insurers have different rules, so it is very important to read the Product Disclosure Statement carefully before you sign a contract for their Full Terms and Conditions.
The Product Disclosure Statement may also state:
- Your cover may also increase by the Consumer Price Index (CPI), or by a predetermined amount which will result in your payment increasing to include a larger amount of cover. If you don’t want your cover to increase, you can usually opt out of this by contacting your funeral insurance provider.
- Most insurers only cover accidental death in the first 2 years of the policy, and if you die from a terminal illness in this time you may not be covered.
- Check your insurer’s definition of ‘fixed’ or ‘level’ premiums, as they may not apply if there is a general rate increase.
- The requirements and timeframe involved in making a claim. (This is important as sometimes it can take a while for your family to receive the insurance payout to contribute towards the funeral costs, as most funeral directors will want to be promptly paid).
Please visit our Information Page for details on both Funeral Bonds and Funeral Insurance here.
