Funeral insurance pays a lump sum benefit so that your loved ones are able to cover the cost of your funeral. However, there’s a bit to consider before taking it out.
Funeral insurance pays a lump sum, typically up to $15,000, to help cover funeral costs.
Look for policies with premium caps or value promises to avoid paying more than the benefit.
Compare options considering funeral costs often between $4,000 and $15,000 and available benefits.
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What is funeral insurance?
Funeral insurance is a type of cover where you pay a monthly premium while you're still living, and in exchange, your family gets a lump sum payout after you pass away, to help cover the cost of your funeral.
Funeral insurance benefits typically pay out up to $15,000.
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.
Stepped premiums: Based on your age, stepped premiums will increase as you get older.
Level premiums: These are more expensive to begin with, but they don't increase over time.
Pros and cons of funeral insurance
Pros
Assurance that your family can afford your funeral after your passing.
Little to no medical underwriting needed to take out a policy.
If you die accidentally within 12 months of taking out your policy, you'll still get the full payout value.
Some funeral insurers will double or even triple the payout if you die accidentally.
Cons
You could end up spending more on premiums than you would have spent on a funeral.
If you live past 100, the policy could expire with no refund of premiums paid.
If you're over 80, you could struggle to be accepted by the insurer.
What will funeral insurance cover?
The payout from a funeral insurance policy doesn't legally have to be used on your funeral - it's just designed for this use. It can be used to organise:
Service & cremation or burial: This can cost upwards of $6,600
Funeral flowers: Depending on what you opt for, this can cost upwards of $200
Newspaper notice: This is typically $310+
Family car: Depending on the vehicle and distance travelled, this can cost from $490
What else can funeral insurance cover?
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:
Accidental death cover. Some insurers will double, or even triple, your payout if you die accidentally. Sometimes it comes as standard, other times it's an optional extra.
Terminal illness cover. Some policies will pay your benefit if you're diagnosed with a terminal illness. You can be involved in the planning of your funeral, or use the funds however you see fit.
Accidental injury benefit. Some policies will pay a lump sum if you suffer a serious injury under a certain age. Eligible injuries include paralysis, loss of sight and loss of limbs.
What to look for when choosing funeral insurance
Our expert says
"Funeral insurance can be great for those who want assurance that their family can afford their funeral when they pass away. However, it's important to find a policy where you won't end up paying more in premiums than you would for the cost of the actual funeral. This can be done by looking for a policy that includes maximum premium caps or value promises."
Funerals in Australia typically cost between $4,000 - $15,000. This cost is so varied because it really depends on the size of the funeral, location and which features you choose to include.
Here's a rough price guide of expenses to consider:
Funeral expense
Starting price
Simple service cremation
$7,500
Simple burial
$6,600
Family vehicle
$490
Funeral flowers
$270
Orders of service
$200
Newspaper / online service
$310
Embalming
$650
Temporary grave marker
$190
FAQs
Some policies require premiums until you pass away. Others have a 'paid up' benefit where you stop paying at a certain age for example 90 or 100 but remain covered. It is important to check the terms of your specific policy for details on when premiums cease or if there is a premium cap.
If you stop paying your premiums your policy will usually lapse and you will lose your cover. This means no benefit will be paid out when you pass away and you typically will not get any refund of premiums already paid. Some policies might offer a partial refund or paid up cover depending on how long you have paid.
Yes, most funeral insurance policies include an initial waiting period. This is often 12 months for natural death. If death occurs due to an accident during this waiting period the full benefit is usually paid. If death is from natural causes within the waiting period a refund of premiums may be given instead of the full payout.
Many funeral insurance policies are guaranteed acceptance meaning you will not need to answer any health questions or undergo medical checks. This can make it easier to get cover even with existing health conditions. However some policies may still have exclusions or specific terms for pre-existing conditions so always check the product disclosure statement.
Generally the lump sum benefit paid out from a funeral insurance policy to your beneficiary is tax free in Australia. This is because it is usually considered a payment from a life insurance policy. However it is always wise to seek independent tax advice for your personal circumstances.
To make a claim your beneficiaries or executor will need to contact the insurer after your passing. They will typically need to provide a death certificate, the policy number and fill out a claim form. The insurer will then assess the claim and if approved pay the lump sum benefit to the nominated beneficiary or estate.
Peta Taylor is a publisher at Finder, working across all of insurance. She's been analysing product disclosure statements and publishing articles for over 2 years. Peta is passionate about demystifying complex insurance products to help users make well educated decisions with confidence. Peta is part of Finder's insurance awards team and works alongside editorial and insights experts to bring users the best insurance products every year.
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James Martin was the insurance editor at Finder. He has written on a range of insurance and finance topics for over 7 years. James often shares his insurance expertise as a media spokesperson and has appeared on Prime 7 News, Insurance News, 7NEWS and The Guardian. An experienced journalist, James' work has featured in publications including The Irish Times, Companies100 and In Business. He holds a Tier 1 General Insurance (General Advice) certification and a Tier 1 Generic Knowledge certification, both of which meet the requirements of ASIC Regulatory Guide 146 (RG146).
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