Find out what makes funeral insurance a suitable option for many Australians
While it's never nice to consider the financial impacts that your death might have on your financial dependents, it's essential to consider different options that will provide much needed benefit in the event of your death. With the cost of often being in the tens of thousands of dollars, a funeral insurance policy can offer great relief at this sad time so your family can focus their energy and finances on other important matters.
What are the key benefits of funeral insurance?
- Less worry for your family: When you have a funeral plan in place you will be able to alleviate the additional stress on your family, who will already be grieving. Your funeral plan will mean one less thing for them to worry about, as they will already have the money available to sort out your funeral
- A quick payout: Most providers of funeral plans will payout within 24 hours of the claim, which means no delays for your family to cope with. They can simply make the claim and then use the funds to get your funeral sorted out without the need to borrow off others or try and scrape together the cash
- Affordable way to pay for your funeral: As is the case with other forms of cover, you will pay monthly premiums for your funeral cover, which makes this a more affordable way of paying for your funeral compared to having to find a significant amount of money on one go
- Peace of mind: Knowing that your funeral costs are already covered in the event of your death will provide both you and your loved ones with increased peace of mind, as it is one less thing for your loved ones to have to worry about during what will inevitably be a difficult and stressful time for them
- Choice of providers: If you are looking to take out a funeral plan you will find a choice of providers and plans. This makes it easier for you to find something that is suited to your needs and which also fits in with your budget
Funeral insurance is also known as a pre-need insurance because you purchase it for a specific purpose in the future and that is to pay for your funeral expenses. It may look like life insurance in the sense that it is your family who will benefit from it when you die, but it is entirely different upon close inspection.
What's the difference between funeral insurance and life insurance?
Life insurance can be used to pay your final expenses as well as provide ongoing income replacement to dependents. Funeral insurance can only be used exclusively for your final expenses.
- No medical tests. Most providers do not require medical check-ups or blood tests.
- Policies can range from $4,000 up to $30,000. The maximum amount for cover, however, can be much higher in other providers.
- Accidental death benefit. This means your family is paid out your lump sum if you pass away due to an accident during the waiting period of your policy.
Compare policies closely
It is essential to compare the features and benefits when choosing a policy as the provisions will vary between providers. For example, some insurance policies will not cap your premiums paid when it reaches your sum insured. This means you could end up paying more in premiums than what your dependents are paid in premiums. Other policies can provide you with a cap to ensure that this never happens.
Funeral insurance has come under scrutiny in recent years due to cases where the policy holder ends up paying more than the sum they originally insured. This has forced funeral insurance companies to introduce features to ensure policies are fair for it's customers.
One of the best ways to ensure you're not ripped off by your funeral insurance policy is to look out for value guarantees in your funeral insurance policy.
1. Levelled premiums
These are premiums that remain the same through out your policy. This ensures that your policy is affordable in the long term.
2. Premium caps
Some policies offer premium caps that allow you cease premium payments once the total amount you've paid has reached your sum insured. In some policies, premiums are capped after you reach a certain age.
3. Payout guarantees
This ensures that your loved ones are paid out the greater between your sum insured and the amount you've paid in premiums.
If you are looking for different alternatives to cover your funeral expenses, consider:
- Your savings: If you are unsure about funeral insurance, one way to save up for your funeral is to allocate some funds into your savings. Make sure that you put your funeral savings in a different account and inform your family what purpose it is intended for. Be careful not to lose your focus as this is the usual downside of people who save up rather than invest in an insurance policy.
- Pre-paid funeral cover: Another alternative is to purchase a funeral plan now and pay it in instalments. You can choose from a range of prices from budget for simple funeral to high for a more elaborate ceremony. One advantage of this choice is that your payment and plan is indexed.
- Life insurance: Life insurance cannot just pay for your debts and mortgages, but also for your funeral expenses as well. One feature available is the Advanced Payment Option which allows you to allocate part of your premium payment to funeral insurance.
Death can happen unexpectedly, no matter what age you are in. It is essential to have a funeral plan, to avoid leaving your family with carrying all the costs associated with preparing a funeral. You can ask your insurance provider about any funeral insurance options that are available and most suited to your budget.
Although you may not want to think about matters such as your own funeral when you are fit and healthy, it can be a really sensible idea to have a funeral plan in place, particularly if you do not want to put increased stress on your loved ones in the event of your death. In fact, taking out these plans whilst you are in a good state of health means that you can get lower premiums and greater affordability on the cost of your funeral cover.