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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.

Maurice Thach
Maurice Thach

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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:

  • Casket or coffin
  • Funeral director’s fees
  • Burial or cremation service fees
  • Burial plot
  • Grave marker
  • Urn
  • Flowers
  • Venue hire
  • Celebrant or clergy fees
  • Transportation
  • Memorial booklet
  • Obituary
  • Death certificate
  • Catering
  • Event organiser service fees

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.

Pros
Cons
  • You are covered from day one for accidental deaths
  • Guaranteed acceptance, with no medical underwriting.
  • Suitable for individuals who are not eligible to apply for life cover because of age and/or health restrictions.
  • Worldwide coverage.
  • Your family will usually receive the payout within 24 hours.
  • Tax-free and there are no tax implications for the policyholder.
  • Premiums can increase as you get older.
  • No cover if you pass away due to a natural cause or an illness in the first 12 months no cover. Premiums paid may be refunded by select insurers.
  • 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.
What should I look out for with funeral insurance plans?
  • Understand the premium structure. Most policies adopt stepped premiums, which will increase as you get older. However, there are some insurers that offer level premiums and they are capped to the cover amount you have nominated.
  • No cover in the first 12 months unless it's for accidental death. Funeral insurance only covers you for accidental death in the first 12 months, but you will be covered for any cause of death past the 12 months period.
  • Find out more if you are able to make changes to your policy after it has commenced. For example, you may want to include additional people on your policy or change your cover amount.
  • If you are still young, consider applying for life cover instead. Some life insurance policies offer funeral advancement benefit as a built-in feature.
  • All funeral insurance policies offer a cooling off period. It's important to assess whether your needs are still aligned with the funeral insurance policy you have in place within this period. If you change your mind, you can cancel within the cooling off period and the premiums you have paid to date will be refunded.

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.

Pros
Cons
  • 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.
What should I look out for on prepaid funeral plans?
  • The ability to transfer your plan. Check your provider allows you to transfer your plan to a different provider if you need to move to a different location to reside.
  • Understanding of the plan's terms and conditions. For instance you may not be able to get a refund on some policies.
  • Check if the policy offers a cooling-off period. This will give you the opportunity to reassess and change your mind if required.
  • Funeral fund rules vary by state. Many states have strict rules protecting your plans and payments in case the funeral directors go out out of business. Check your states rules around funeral plans before commiting as some states have more protections for buyers than others.

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.

Pros
Cons
  • There are no entry or exit fees.
  • Funds invested in the bond are exempt from the income and assets tests.
  • As an investment product, your savings will grow overtime.
  • Option pay for your bond upfront or by monthly instalments until you reach the chosen value of your bond.
  • You can keep your funeral funds separate to your other investments.
  • You can nominate your own funeral director.
  • More flexible if you are required to travel or move in the future.
  • The final sum offered by a bond may not be sufficient due to rising funeral prices and inflation. Your family may be required to cover the rest of your funeral expenses.
  • With an instalment plan, 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.
What should I look out for with funeral bonds?
  • It is important to read the funeral bond’s prospectus to understand terms, conditions, and the costs involved.

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.

Which 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.

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2 Responses

    Default Gravatar
    bevJune 9, 2017

    What funds are there that I can take out a prepaid funeral and pay off in monthly instalments – I am 68 y.o.

    Reply
      Avatarfinder Customer Care
      MayJune 9, 2017Staff

      Hi Bev,

      Thanks for your inquiry.

      If you are after a prepaid funeral you will need to speak to a funeral director or a funeral planner.

      Alternatively, if you’d prefer to get a quote for funeral insurance and compare your options, you can enter your details into the form found this page. Basically, the premiums for funeral cover is paid monthly just like the case of any other forms of cover. Although the total monthly premium will vary depending on how much cover you will get.

      Cheers,
      May

      Reply
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