Funeral Plans in Australia

Want to avoid leaving behind a large funeral bill for your loved ones? Find out what your options are in Australia.

When you are still getting on with life, your own mortality is not something you really want to think about, so why worry about your funeral expenses now? While there may be no sense urgency, you may be surprised how much funeral arrangements can cost these days - from anywhere between $4,000 up to $15,000 (Money Smart, 2013). The average costs of funerals in Australia often vary significantly because of the difference between one family’s needs and requirements to the other.

Three common ways to fund funerals

• Funeral insurance
• Pre-paid funerals
• Funeral bonds

What should I consider before organising a pre-paid funeral plan?

There are a number of different components to consider when arranging a funeral, which will vary the cost depending on the service providers and each can have a great impact on the final bill. The cost of organising a wake is another expense that is often forgotten. Some of the typical costs of a funeral arrangement often include:

Different types of funeral plans in Australia

There are three main kinds of funeral plans available on the Australian market, each with components suitable for different individuals. To determine which funeral plan is most suitable to your needs and budget, it's important to review the terms and conditions of each of these plans. Understand the cost implications overtime and any restrictions that may affect your funeral benefits.

1. Funeral protection insurance
2. Pre-paid funeral plans
3. Funeral bonds

1. Funeral Protection Insurance

Funeral insurance is designed to provide a lump sum payment of fixed amount of cover, in return of ongoing premium payments, either on a fortnightly or monthly basis. Generally, you can choose a cover amount between $5,000 up to $30,000 with increments of $1,000, which will be paid to your nominated beneficiaries if you are to pass away. Funeral insurance policies can vary significantly between providers, so it is important to read the Product Disclosure Statement (PDS) closely before you sign up. Remember that with funeral insurance, you are not saving for funeral costs. Rather, you are buying insurance so that these costs can be met in the future if anything happens to you.

2. Pre-Paid Funeral Plans

With a pre-paid funeral plan, you can organise a payment plan or pay for your funeral in advance. The cost for the funeral arrangement is locked in at today’s rates and won’t change regardless of any future changes. The benefit is paid to your family either as a lump sum or in instalments. When paid in instalments, an initial payment may be required upfront. Be aware that the cost of a funeral director’s services and packages often vary from one to the other. So, make sure that you have detailed descriptions of the costs to know what you are paying for.

3. Funeral Bonds

Funeral bond plans are investment products designed to put aside funds to cover your funeral costs. The money set aside in a bond can only be used for this purpose and to be withdrawn after you have died. Funeral bonds are flexible and portable investments, so you won’t be tied to any fixed locations. You can opt to invest in a funeral bond directly through an investment company (friendly societies or life insurers), or from a funeral director, and it can be assigned to your chosen funeral director. You can invest up to a maximum of $11,000 in your funeral bond and it is indexed on an annual basis.

Other ways to fund your funeral expenses

• Superannuation. If you die, the balance in your super fund will be paid to your dependents or estate. This also includes any benefit payments from your superannuation life insurance policies. It may, however, take some time for the benefits to be released and your family may have to cover your funeral expenses initially.
• Term Deposit/High Interest Savings Account. You may wish to set up a term deposit or high interest savings account and save until you reach the amount you deem sufficient to cover for your funeral expenses. Make sure that you let your relatives know about this account, so they can access the funds when they need to.

Why plan is right for me?

Choosing between different funeral plans and options available to fund your funeral arrangement may not be such an easy feat. Your best bet is to compare different plans to determine which ones will suit your personal needs the best. When in doubt, consider speaking to an insurance adviser or financial planner who can help you in your decision.