In Australia funeral insurance, also known as funeral cover, is a type of personal insurance designed to pay a lump sum benefit to your loved ones to cover your funeral expenses.
This type of cover is readily available in Australia, often without the need for a medical examination. Due to this lack of general and medical questioning at application time, premiums are generally higher compared to life insurance policies.
If there are any proceeds left after paying for your funeral, the funds can also be used to pay for debts, or for any other bills.
Who can benefit from funeral insurance plans?
Funeral insurance may be beneficial for people with numerous medical conditions. It may also be beneficial for seniors who have been unsuccessful in applying for life insurance due to entry age restrictions.
If you do not fall into either of these categories then life insurance may be a better option. Many life insurance policies in Australia offer a funeral advancement benefit to help pay for your funeral expenses. Speak to your xLife adviser to find out which life insurance companies offer this type of benefit.
Which is better, life insurance or funeral cover?
If your application for life insurance is accepted, it is usually a better option compared to funeral insurance. Life insurance coverage tends to offer better protection by offering a higher benefit payment, and usually some form of funeral advancement benefit. The higher benefit payment can better protect your family in financial terms while they cope with their grief.
Funeral insurance premiums tend to be higher than life insurance premiums, and benefit payments are usually at a maximum of $15,000 in Australia (1).
If you are in a position where you cannot get life insurance coverage, then funeral insurance may be for you.
How much do you need to cover funeral costs?
If you do decide to purchase funeral insurance then your next step is to determine how much cover you need. As previously mentioned funeral insurance benefits are usually around the $15,000 mark or lower; and since funeral insurance premiums are higher it would be prudent to make sure you are not over-insured.
How much funeral cover you need to purchase depends on your funeral plans. This really means how you would like your funeral to proceed. Would you like an extravagant funeral, or a simple one? Obviously the more extras you add to your funeral, the greater the funeral cost and the amount insured.
You may like to put together a detailed funeral plan to determine how much a funeral of your choice may cost. You should at least look at the price of caskets, burial plots, or cremation services. Do not be afraid to contact a funeral home to discuss the cost of their services and obtain a quote to help you further compare funeral insurance quotes. If you are ever in doubt speak to your financial adviser to discuss your funeral insurance needs.
1. Zurich 2011