We have all seen the funeral insurance advertisements plastered across TV, particularly on Foxtel from my experience… And funeral insurance providers often appear in the media for, less than good reasons. The Australian Government site MoneySmart offers this breakdown of pros and cons:
Pros
Immediate cover, but with exclusions — Most policies will only cover accidental death in the first few years.
Helps people who struggle to save — It may suit you if you aren’t sure if you can save for funeral costs.
Cons
Premiums can increase a lot over time — There can be big increases after you turn 50. Premiums can become unaffordable when you’re living on a pension.
No refund on premiums you’ve paid — If you cancel your policy or can’t afford the premiums, you’ll probably lose the money you’ve paid.
Your premiums could cost you more than your funeral — If you live another five to 10 years you may end up paying more in premiums than the cost of the funeral.
Exclusions apply in the first few years — If you die from a terminal illness in the first few years, you may not be covered. Check the policy’s terms and conditions.
You don’t get the money right away — It can take a while for your family to receive the insurance payout to cover funeral costs.
You are not arranging your funeral, simply covering the cost. You should still talk to a funeral director to ensure they record your wishes and get your family details. Doing so will take this burden away from your surviving relatives when the time comes.
So, there are a lot more cons and even the pros, sound like cons. MoneySmart even goes on to suggest cheaper alternatives such as pre-paid funerals and funeral bonds. Often, funeral insurance is confused with pre-paid funerals and funeral bonds but there are large differences.
A Pre-Paid funeral locks in the price of the products and services which you have already chosen. This protects you from increasing service fees and also inflation. With flexible payment options, should the holder pass away before all fees are paid, the money already paid will go toward the cost of the funeral.
A Funeral Bond is somewhat different, as it doesn’t lock in anything but it can gain interest. With the bond, what you put in is capital guaranteed and can only be accessed when the holder passes away.
For more information on the different options, or how you can swap to a pre-paid funeral or a funeral bond, you can always call our team.
H.Parsons would certainly encourage you to make sure you do plenty of research before agreeing to any financial service.
