When you're still getting on with life, your own mortality isn't something you want to dwell on. But it's important to be aware of your options when it comes to your funeral expenses. After all, the costs be very steep, with Moneysmart research suggesting that arrangements can cost anything between $4,000 and $15,000.
What are the main costs of a funeral?
There are a number of things to look at when arranging a funeral. Each will vary in cost depending on the service providers. These include:
- The wake
- Casket or coffin
- Funeral director’s fees
- Burial or cremation service fees
- Burial plot
- Grave marker
- Venue hire
- Celebrant or clergy fees
- Memorial booklet
- Death certificate
- Event organiser service fees.
➡️ See the breakdown of average funeral costs
Different types of funeral plans in Australia
There are three main types of funeral plan available on the Australian market: Funeral insurance, Pre-paid funeral plans and Funeral bonds.
With funeral insurance, you pay a monthly or annual premium to the insurer. In return, the beneficiary or beneficiaries you nominate receive an agreed lump sum, usually between $3,000 and $15,000.
Funeral insurance policies can vary significantly between providers. With funeral insurance, you aren't saving for funeral costs. Rather, you are buying insurance so that these costs can be met in the future if anything happens to you.
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- A policy held within life insurance can pay a benefit of up to $25,000 in some cases. Alternatively, you can buy standalone funeral cover
- You are typically covered from day one for accidental deaths
- Guaranteed acceptance, with no medical underwriting
- Payouts can be quick – potentially within 1 day
- Worldwide coverage
- Generally, it's a tax-free option for the policyholder
- Premiums aren't locked in from day 1; they can increase as you get older.
- Often there's no cover if you pass away due to a natural cause or an illness in the first 12 months. Premiums paid may be refunded, however.
- You may be paying more in premiums than the cover amount that you have nominated.
- If you can no longer keep up with the premium payments and cancel, you won't be able to get a refund on premiums paid.
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 the details of the costs to know what you are paying for.
- Your funeral costs are fixed to the price at the time of application, even if your funeral is not for a number of years.
- You can organise specific arrangements for your funeral together with the plan.
- You can pay for your funeral arrangement in instalments.
- No health checks required.
- You may be able to maximise your pension entitlement, as the payments to your pre-paid funeral plan is not subject to income and assets test.
- You may be required to pay a deposit when signing up for a payment plan.
- If you are looking to move interstate, it may be difficult to transfer your funeral plan.
- You may not get any of your money back if you change your mind.
- There is no discount for couples or families, as pre-paid funeral plans are purchased on an individual basis.
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 gets withdrawn after you have died.
Generally, you can opt to invest in a funeral bond directly through an investment company (such as friendly societies), life insurers) or from a funeral director, and it can be assigned to your chosen funeral director.
- There are usually no entry or exit fees
- Funds invested in the bond are exempt from the income and assets tests
- Can be more flexible if you need to relocate in the future
- The final sum offered by a bond may not be sufficient in the event of rising funeral prices and/or inflation. This means your family may be required to cover the rest of your funeral expenses
- If you die before the bond is paid in full, your family will only receive the amount that has been paid into the bond; plus any earnings from the investment
- If you decide to discontinue your bond, you may not get your money back
How to settle on the right option for you
Choosing between different funeral plans and options to fund your last wishes can be tricky. A good general tip: Compare at least 3 quotes, so that you have a better understanding of whether you are getting the right plan for you at a competitive price. If you're still unsure, speak to an insurance broker or financial planner.
Why you can trust Finder's life insurance experts
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