This article was written prior to 15 March 2021, before the launch of the new Financial Advice Regime, and was published for information purposes only. It is not being actively promoted by Dollar Insurance. Dollar Insurance does not provide financial advice about the suitability of their products and cannot take into account your personal situation or goals. Before you decide to take out a Dollar Insurance Policy, you should read the relevant Policy Wording document which contains the terms, conditions, and exclusions of the Policy, and seek independent financial advice, if required, to ensure the insurance policy is suitable for you.

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Funeral insurance: Maybe you’ve heard of it. Perhaps you’ve seen ads but can’t quite wrap your head around what it is, what it’s for or why people have it.

You might even be put off by its name. We get it—thinking about death can be tough, and many of us would rather not focus on something that will hopefully happen many, many years from now. Buying funeral insurance (or even just thinking about it) may feel like you’re somehow tempting fate.

But unfortunately, death is a part of life. As much as we hate to admit it, planning for the end of our lives may be a smart move. Funeral insurance could be a part of this plan.

What is funeral insurance?

You have car insurance in case you’re in an accident and home insurance for household disasters. Travel insurance can help if something goes wrong on holiday, and pet insurance might help when a furry friend is sick or injured.  So, funeral insurance is for things that could go wrong at a funeral, right? 

Not really. Funeral insurance is about helping to cover the cost of your funeral, or whatever else your family might need money for at the time. The benefit is paid in a lump sum which your family can spend how they please. Though the money from a funeral cover policy can be used for just about anything—arranging all or part of a funeral, paying final debts, covering household bills, traveling to visit family—hopefully there won’t be any mistakes or disasters on the day that need to be taken care of!

How is funeral insurance different than life insurance?

If you know anything about life insurance, you might be wondering how funeral insurance is different. It’s true that these two types of policies are similar, but they differ in some key ways:

• What’s covered – Most funeral cover policies only pay their benefit after you pass away. Life cover also does this but might offer early payment if you’re diagnosed with a terminal illness.
• How much cover people can get – The amount of cover that funeral policies offer is usually less than what customers can get with life insurance.
• What the money’s for – Funerals are thankfully a one-time expense (part of why the cover amounts are often lower). Life insurance, on the other hand, is usually meant to help families for a longer time and with bigger bills, like the mortgage or car payments.
• Who can buy cover – Insurance companies all have different rules for who can and can’t apply for their policies, and sometimes people are left out because of certain health conditions. But, funeral cover is often ‘guaranteed acceptance,’ meaning just about anyone can get a policy! You’ll probably need to be a certain age or a resident of a certain country, but those are typically the only requirements. 

Why do people buy funeral insurance?

There are lots of reasons why people decide to get funeral cover. Here are a few:

They’re worried about funeral costs – According to the Funeral Directors Association of NZ, an average funeral can range from $4,000 to $15,000.1 That puts many families in a pinch when a loved one dies, especially since the money is often needed on short notice. Funeral insurance could help cover these expenses. 

They want to make it easier to honour their final wishes – Do you want to be buried next to a family member? Have your ashes sprinkled at a favourite beach? Turn your remains into a vinyl record? Your family may want to honour this final request, but the cost might make that tough. A funeral insurance policy could give family a little extra money to make your final sendoff that much more special.

Life insurance isn’t the right fit for them – Lots of health questions, restrictions on what’s covered, age limits and expensive payments often leave people out of the running for life insurance. Even so, you may not want or need the amount of cover it can provide. Funeral insurance might give you just the right amount for your age and needs.

Putting a plan in place

Funeral insurance is designed to help people prepare for the future. It may not be the most fun thing to consider, but it could be an important part of your end of life plans. 

Sources

1. Funeral Directors Association of NZ, Saving for your funeral is important to remember in Money Week, August 2017 

About the author: Dollar Insurance is all about making insurance as painless as possible, with easy to get funeral cover, for just $1 a day. 

Disclaimer: The information provided in this article is of a general nature only and does not take into account your personal situation or goals. You should consider whether the information is appropriate to your needs and seek independent financial advice, if required, to ensure an insurance product is suitable for you.

Any product information is correct at the time this article was published. For current product information, please visit the Dollar Insurance website.