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Funeral insurance is a type of protection taken out purely to cover the cost of your funeral after you die. Funeral insurance pays a lump sum benefit, usually up to $15,000, so that your loved ones are able to cover the cost of your burial or cremation without using their own money, or even going into debt.
It typically appeals to people over the age of 50 who can no longer find an affordable life insurance policy, perhaps due to pre-existing medical conditions. It is also handy for those who don't have savings set aside to pay for a funeral after they die.
You pay a regular fee, usually every fortnight or every month, and your insurance company promises to give a lump sum payment to your family when you die. Typically, insurance companies will offer between $5,000 and $15,000 as a benefit.
Sometimes, when you reach a certain age, you no longer have to pay insurance premiums, but your insurance company will still pay out the benefit when you die.
You can usually pay for funeral insurance in two ways: either with level premiums or with stepped premiums.
Funeral insurance gives your estate a lump sum when you die, so that they can pay for your funeral without worrying about the cost. Typical funeral expenses include:
Funerals can cost as little as $4,000 for a simple cremation, so if you want cheap funeral insurance, there are certainly options out there. However, funerals can cost up to tens of thousands of dollars for a more elaborate ceremony.
A 2018 Finder study analysed the average price of funerals in major Australian cities. The table below shows how the costs compare.
| Rank | City | Average burial cost | Average cremation cost |
|---|---|---|---|
| 1 | Sydney | $7,961 | $8,553 |
| 2 | Canberra | $6,654 | $7,622 |
| 3 | Brisbane | $7,810 | $7,354 |
| 4 | Adelaide | $7,417 | $6,965 |
| 5 | Perth | $7,875 | $7,441 |
| 6 | Hobart | $7,068 | $6,716 |
| Total average | $7,464 | $7,442 | |
Funeral insurance has its benefits and its drawbacks. Take some time to understand these properly, so that you don't buy a policy that doesn't fit your personal needs.
Funeral insurance can cover more than just the cost of your burial or cremation. Some policies offer additional benefits, which could make a policy more worthwhile:
In addition to the benefits above, there are a few key features that you should always consider when shopping for a policy, so that you can find the best funeral insurance for you:
Funeral insurance usually appeals to seniors more than any other age bracket. However, it's important to know that companies won't offer cover to people over a certain age, usually somewhere between 65 and 80, depending on the insurer.
Luckily, there are still plenty of funeral insurance options for seniors under the age of 80.
If you want your whole family to have the security of funeral insurance, you may want to consider funeral insurance for families or funeral insurance for couples.
Buying funeral insurance as part of a family or couple can come with a couple of key benefits, including multiple person discounts and convenience.
Funeral insurance is a good option for people who want to help their family out financially, but there are some traps to watch out for. A couple of key drawbacks are:
Yes. Funeral insurance isn't the only way to pay for your funeral. Consider whether these other options are right for you:
Cremations can be a much more affordable option than burials.
Planning for future funeral expenses? Find out what plans are available in Australia.
With Funeral Plan from Guardian Insurance, protect your loved ones against the financial burden that they may have to endure when you pass away. The lump sum benefit can help pay your funeral expenses and any other expenses that may arise.
Find out if you need life insurance or funeral insurance and what the major differences are.
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Read the finder.com.au review of the Australian Seniors Funeral Insurance policy.
After funeral insurance for the family? Compare quotes from Australian insurers.
