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Funeral Insurance - Yes or No?

Paul Davies | February 16, 2017

In 2016 I was interviewed on A Current Affair about the pros and cons or Funeral Insurance, and whether it was worthwhile considering it or not as there had been a lot of bad press about it.


I wanted to give you some basic information on both Funeral Insurance vs Retail Life Insurance (the type we work in) so you can make an informed decision about what you should do, or at least raise some questions you might have.


So what are the facts about Funeral Insurance?



It pays a lump sum to the funeral company on the life insured.
Premiums are paid up to the value of the benefit amount over time.
Benefits remain the same throughout the life of the policy until claim time.
There is no cash value if you cancel the policy.
No medical information is required.

The facts of Retails Life Insurance



Pays a lump sum benefit to the life insured or the estate.
Premiums are paid each month/year and increase with age.
Benefits can be increased or decreased over time at any stage.
There is no cash value if you cancel the policy.
Some medical information is required at application time.

PROS and CONS:


The Pros of Funeral insurance are:



Any age can obtain a policy
Mostly premiums stop after you have paid the actual cost of the funeral (not always)

The Pros of Retail Life Insurance are:



Benefits are as much as 40 times more than funeral insurance for the same cost.
Benefits aren't reliant on the amount of a funeral. They are paid to the family, not the funeral company.
Premiums can be paid from your superannuation fund if preferred.

The Cons of Funeral insurance are:



Premiums are much higher than other options
Benefits are usually lower than the actual cost of a funeral (as time goes on)
Benefits are paid directly to the funeral company

Most policies are accident only for the first 12 months




The Cons of Retail Life Insurance are:



After the age of 70, premiums are very high.
After the age of 70, insurers generally won't accept new applications.
Premiums increase with age (although you can reduce your benefit to meet your budget)

In some instances, people end up paying thousands of dollars more than the actual cost of the funeral – sometimes double or triple the amount of the premiums they’ve paid on their Funeral Insurance.


The take away point is it’s the same with any insurance. You’re paying for protection of an uncertainty. If you knew when it would happen, you would just save. The insurer is simply taking a bet that you won’t claim.


With this information, when you do see the commercial on the daytime television (every 14 seconds) and would like to compare the cost, you can give us a call on 1800 674 435 or EMAIL US. Below is an example of the differences in premiums for your comparison.



Life insurance is simply underwritten by the insurer. They ask a few more questions and in return charge a lower premium because they can calculate their risk better.


Funeral insurance asks no personal details, so they don’t know what risk they are insuring. So they have to charge more.


I hope that helps you understand the funeral insurance difference.


Alternatively, you can consider 'Parent Cover' for your older parents.


 

About Me

Paul Davies

Current Rating: 5 / 5
Insurance Broker
Jarickson Life Insurance Brokers
http://www.jarickson.com.au
Rouse Hill, New South Wales
0411 511958
As a specialist in the insurance industry, my role is to help you find the right life insurer for your particular circumstance, in language that everyone can understand.

The difference between having a specialist help you and someone over the phone or website is at claim time. You pay premiums and you want to make sure that the Right Amount of Money gets to the Right People at the Right Time.

Everyone has different family and business dynamics, and it's very difficult to find the right type of Life Insurance, Income Protection or even Keyperson insurance if you don't work with insurers every day.

Since 2001, I have specialised in personal insurance within the financial planning industry with several awards such as Financial Adviser of the Year through Investors Choice Magazine.