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Everything You Need to Know About Funeral Insurance

Is the value of funeral insurance cover worth the cost? Will the lump sum actually support your loved ones in their time of need, and reduce the pressure of funeral costs? Today, we cover everything you need to know about funeral insurance in Australia. From what it is, the benefits, and why it may or may not be suitable for you.

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Planning a funeral can end up costing a lot of money. It's why many Australian residents are choosing funeral insurance. To help cover their funeral expenses, to help reduce uncertainty, and to help alleviate pressure on your loved ones in an already challenging time.

In this blog post, we consider these benefits in light of the existing drawbacks if you buy funeral insurance. Breaking down the marketing flash words and fear mongering sales pitches, to uncover whether the average cover offered really offers the right support for you.

What is funeral insurance?

Funeral insurance is something you purchase to cover the cost of your funeral after you die. This will cover everything from the funeral director to funeral cars, chapel fees and death certificate. Since these final expenses can be quite costly, funeral insurance is one way to plan ahead and facilitate more family peace in this time. With financial support minimising any additional stress during this time.

The benefits of a funeral insurance policy

Besides the finances, this cover can provide an array of benefits, which we outline below:

  1. Peace of mind:
    In knowing that your loved ones won't be left to cover the cost of your funeral, you can relax knowing your wishes will be undertaken, without placing a financial burden on those you love the most.

  2. Financial security:
    Life is filled with uncertainties, and life can present expensive and unexpected twists at any point. Funeral insurance means that a funeral won’t be one of them, and can help provide an extra layer of security for your family at an already stressful time.

  3. Customizable coverage:
    Many funeral insurance policies offer customizable coverage options to best fit your coverage to your needs and budget.

  4. Avoidance of debt:
    A funeral isn’t something we can skip out on, and so taking out a funeral insurance policy can ensure your family doesn’t have to enter debt to cover the costs of a funeral upfront

  5. Ease of payment:
    Funeral insurance policies often come with the added benefit of flexible payment options, such as monthly or annual premiums. This makes it easier to budget into your life expenses, treating it like a monthly bill you have to pay each month.

  6. Early access to funds:
    In some cases, policyholders may be able to access the funds from their funeral insurance policy before their death, providing additional financial security for any end of life care needs.

  7. No medical exams:
    Unlike other forms of insurance, many funeral insurance policies do not require a medical exam, making it accessible to individuals of all ages and health conditions.

How does funeral insurance work?

It’s important to undertake a process of research and comparison when thinking about funeral insurance for yourself. This allows you to get the best value deal, which fits your specific needs and budget. You'll want to consider any existing insurance policy you hold, cover amount, early payout option and any annual premium discount.

With these specifics in mind, there are two main types of funeral life insurance policies available in Australia:

  • Pre-paid funeral plan: allowing policyholders to directly cover the funeral cost of all expenses. This cover amount will be locked in at today’s price, and the funds held in trust until they are needed.

  • Funeral expense insurance policies: a funeral insurance benefit is paid out to your beneficiaries in a lump sum payment when you pass away. With premiums paid, your family receives the benefit amount to cover funeral planning and other final expenses.

These policy specifics and benefits may vary depending on the provider, so taking time to conduct the research and comparisons is crucial to finding one whether the cover amount will fit your needs. Award winning insurance might work great for one person, but provide an average cover amount which is insufficient for you. So do your research and take time to consider whether the value promise is worth the payouts.

Assuming you chose funeral insurance, you can go on to apply with some personal, financial and health information. You'll then go on to pay monthly premium payments based on your level of cover, and age.

Does the cost of funeral insurance cover funeral costs?

Funeral insurance cost, and funeral cover benefit, will depend on a number of factors personal to you. Meaning the same funeral insurance policy could look different for different people. Age pension, terminal illness or other health conditions will impact the cost. Additionally, the type of policy, frequency of funeral insurance premiums and extent of funeral cover will impact how much your policy costs.

For a typical standard policy, funeral insurance policies in Australia cost between $10 and $30 per month. Or, an average of between $3,000 to $15,000.

Much like other life insurance policies, factors such as older age, pre-existing health conditions or increased coverage to cover funeral services, will be associated with higher costs.

Why should you plan ahead for your funeral expenses?

When you pass away, your family is responsible for arranging and paying for your funeral. The cost of a funeral depends on the selections made by your family, which may be impacted by any other outstanding debts in your estate.

Thinking ahead and deciding how to pay for things like funeral director fees and other expenses, can spare your family from additional financial anxieties and extra cost. When planning for expected funeral costs, funeral arrangements often include:

  • Service fees

  • Flowers

  • Minister

  • Removal and preservation of body

  • Burial or cremation

  • Coffin or casket

  • Cemetery and grave fees

While funeral insurance can help relieve some of the pressure and protect your family from financial stress, the cost of these items and services can quickly add up.

What do you need to consider with funeral insurance?

The premiums for funeral insurance might initially be low but can gradually increase over time. As you get older, the cost of your premiums get higher. Instead of leaving any additional money in your estate, you can end up paying thousands of dollars in excess straight to your insurance provider.

There's also the risk of losing your funeral insurance if you miss a payment. If you find yourself facing unexpected costs and are worried you won't get premiums paid, this could be a sign to reconsider whether funeral insurance cover is for you.

Is there an alternative to funeral insurance?

Prepaid funerals and cremations can give you greater reassurance in uncertain times. They avoid the uncertainty of funeral insurance premiums, whilst providing the benefits of funeral cover. The benefit amount is set in stone, and you won't need to worry about the average cost of funerals rising when you have these prices, and full details of your funeral, locked in.

When might pre paid options work better for you

If your finances begin to fluctuate as funeral costs continue to rise, or you're worried about how unpaid bills will affect entitlements, then prepaid services might be more suitable. Fixing in today's prices and saving you and your family money and stress.

This also removes the risk of outstanding debts, if funeral cover from a lump sum payment in an insurance policy fails to cover all expenses after you pass.

As planning and payment are organised well in advance, prepaid funerals can simplify some of the hardest parts of funeral arrangements.

To Wrap Up

Funeral insurance is one option you can use as an Australian resident, to ensure the financial burden of your funeral doesn't fall on a family member. Whether you opt for a traditional burial or cremation, this policy can provide triple benefit; from peace of mind for you, peace of mind for your family, and reduced financial burden at a future time. Standing as a worthwhile investment if the worst case scenario comes in an unexpected, sudden or accidental death.

It is worth noting that like any other life insurance code, there may be a waiting period for even an approved claim on funeral expenses. Depending on your funeral policy, it's not a quick cash payment option, or guaranteed acceptance of all funeral costs from the insurer. And despite payouts, a family member might still be left to fork out some cost.

In light of this, you might find yourself with mounting premiums as your policy anniversary comes around each year. Wondering if the funeral benefit/cover amount will even exceed the premiums you paid. Pre pre-paid funeral or even a funeral bond might provide you with more certainty, rather than wondering if the cover amount will be sufficient. We recommend doing your research, and taking time to decide the best option for you.

Safewill can Help

For further assistance arranging and prepaying an affordable and personalised farewell, our friendly team at Safewill Cremations can help. Providing a compassionate approach to help with your funeral planning at any point in your journey.

Call us on1300 730 639 , or start a livechat now, for 24-7 assistance on all your needs.

Last updated 26th May 2022
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Lauren Barrientos
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