Explore Life Insurance

With multiple insurance products on the market, it can be tricky to know which type of cover is most suited to your needs and budget, and which products offer you the best value for money.

That’s why we’re putting funeral insurance under the microscope, breaking down how it works and how it compares to life insurance.

What is funeral insurance?

If you pass away, funeral insurance could pay a lump sum benefit to assist your loved ones with funeral costs and other related expenses. Depending on the type of funeral, the potential out-of-pocket costs could be between $3,000 to $15,000, not including other final expenses like outstanding debts.1

However, funeral insurance isn’t the only way to get the peace of mind that your family could be financially supported if you pass away. Pre-paid funeral plans, funeral bonds and life insurance are alternative ways to potentially cover the cost of your funeral. Here’s how they work

  • Pre-paid funeral plan: You pay for your funeral in advance directly to the funeral director.
  • Funeral bonds: An investment that builds value and is withdrawn after you pass away.
  • Life insurance: Cover that could pay a larger lump sum benefit if you pass away or are diagnosed with a terminal illness. Usually has more medical underwriting than funeral insurance but may have cheaper premiums as a result.

Grandparents with funeral insurance play with grandson

How does funeral insurance work in Australia?

To be covered by funeral insurance, you’re required to pay a regular premium (e.g. fortnightly, monthly or annually), the cost of which is influenced by your age, gender and level of cover (i.e. how much your beneficiaries receive in the event of your death). Typically, cover in Australia ranges from $5,000 to $15,000.2

Your eligibility for funeral insurance varies between insurance providers, with the typical entry age for Australian residents ranging from 45 to 80. Again, depending on the insurer, you generally don’t need to undergo medical or blood tests to take out cover.

If a claim is made on your funeral insurance, the benefit amount will be paid to your nominated beneficiary (like your spouse or your child), which can assist with your funeral expenses.

Life insurance versus funeral insurance

What are the similarities and differences?

Both funeral insurance and life insurance are designed to pay out a lump sum of money to your chosen beneficiaries when you pass away. On top of this, both types of insurance may be available with either level or stepped premiums:

  • Stepped premiums differ to level premiums, as they can increase based on your age at your policy anniversary. This means stepped premiums may start out cheaper than level premiums but can become increasingly expensive as you age.
  • Level premiums are typically more expensive at the beginning of your policy; however, they remain more constant throughout the life of your cover. Unlike stepped premiums, level premiums don’t increase with your age, although both types can increase for other reasons.

However, unlike funeral insurance (which usually pays out a maximum of $15,000), life insurance can pay a significantly larger amount – sometimes up to millions of dollars – to your loved ones, depending on your cover amount. On top of this, life insurance policies can provide cover for a range of needs you generally won’t find in a funeral insurance policy.

Funeral insurance
Helps your loved ones afford funeral expenses.

May be able to get immediate cover.

Some insurance companies offer bonus cover if you reach a certain age or hold cover for a set amount of time.

Generally, no medical checks are necessary to get covered.

Depending on the insurer, capped premiums may be available to ensure you don’t pay more in premiums than the cover amount.

It’s usually very easy to take out a policy if you meet the insurer’s age requirements, and many policies offer guaranteed acceptance.

You may receive discounts on a joint policy.

It’s possible you can pay more for premiums than your sum insured.

Premiums can be expensive, depending on the insurer and the product you have, and can be difficult to afford if you’re heading towards retirement or are already retired.

Could have more exclusions (e.g. accidental death cover only for the first few years).

Stepped premiums may affect your ability to afford future repayments, as premiums increase as you grow older.

Life insurance
Your beneficiaries can claim on your policy, which can help with a range of scenarios like funeral expenses, paying off debts and funding children’s education.

Can often bundle other types of cover, such as total and permanent disability, trauma and income protection if you’re unable to work due to injury or illness.

You can receive a payout if you fall terminally ill rather than only when you pass away.

Can be quite affordable for the sum insured compared to funeral insurance.

Benefit indexation is available in most cases to keep up with inflation costs (with the option to opt out).

Some policies allow for an advance payout, up to a certain amount to help pay for your funeral expenses.

You may be able to fund this with your superannuation to reduce the out-of-pocket premium costs.

Cover is not always guaranteed; acceptance is often based on (depending on your type of life insurance) your medical history/status, age, occupation, sporting activities and any health conditions (among other factors).

Age and health conditions may affect life insurance costs.

Payouts may take longer than funeral insurance payouts.

Life insurance for funeral costs and other expenses

As highlighted in our table above, some life insurers may offer an advanced payment to help with funeral expenses, which is also known as a funeral advancement benefit.

Furthermore, some policies may include benefits to help with financial planning costs and for other defined events, like terminal illness and accidental death cover.

Executive General Manager of Health Life and Energy

Meet our Executive General Manager for Health, Life and Energy, Steven Spicer

As the Executive General Manager of Health, Life and Energy at Compare the Market, Steven Spicer understands just how unpredictable life can be, which is why he believes so strongly in the benefits of being covered. Steven is passionate about making life insurance more accessible and educating Australians on how to find the right product for them.

Steven has 20 years of experience as a people-first business leader, with a focus on creating services that put customers first.

Should I take out funeral insurance or life insurance?

We believe it’s important that you carefully consider your needs and budget before taking out funeral or life insurance.

Whether you have funeral or life insurance, it’s also vital to remember that if you can’t keep up with the premiums and end up cancelling cover, you’re unlikely to receive any money back.

Funeral insurance is an option for those who might be ineligible for life insurance (e.g. those who may be over the entry age for life insurance or have an adverse medical history) or who don’t need to cover more than just the money their family would require for a funeral when they pass away.

On the other hand, life insurance can help cover funeral expenses and other costs that can impact your loved ones should you be diagnosed with a terminal illness or pass away.

To see if life insurance could suit your needs, try comparing policies through our free and easy-to-use comparison tool. It takes just minutes to compare a range of life insurance policies and get a quick quote from some of Australia’s top insurance brands.

Before deciding to take out funeral or life insurance, it’s recommended that you check the relevant Product Disclosure Statement (PDS) and Target Market Determination (TMD) to see if the policy is right for you.


1 ASIC, Moneysmart – Paying for your funeral. Accessed October 2022.
2 ASIC, Moneysmart – Funeral insurance. Accessed October 2022.

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