On average, Australians have a higher life expectancy than people in other nations. And our health science keeps moving forward in leaps and bounds, meaning we could live even longer in the future.
While we can do our best to live long, happy, healthy lives, at some point there comes a time to say goodbye to our loved ones. However, funerals might not always be reasonably priced. According to MoneySmart, a funeral can cost up to $15,000 in Australia. This is where funeral insurance comes in.
What is funeral insurance?
Funeral insurance is a general insurance product that pays a benefit on death or terminal illness, helping alleviate financial difficulty during a time of stress. That way you can still be there for your loved ones, albeit financially.
Depending on the provider, you are generally eligible for funeral insurance if you are an Australian resident aged between 18 and 70 and you haven’t been declined life insurance due to health reasons. This product could suit those who do not have the financial means to cover the costs associated with their funeral.
Life insurance vs. funeral insurance
While both of these products are designed to pay a sum or money to your spouse, children or close relatives on your death, they are otherwise very different.
Life insurance pays a significant amount – up to $5,000,000 – to your loved ones so that they have financial security in the event of your passing or diagnosis of terminal illness. On the other hand, funeral insurance pays a smaller amount – usually approximately $15,000 – to cover the cost of your funeral.
Some life insurance policies do provide funeral-related benefits in the event of death or terminal illness, but it’s important not to confuse the two types of product generally.
What’s a ‘prepaid funeral’?
When you have a prepaid funeral plan, you effectively pay in advance for your funeral – either partially or in full. Prepaid funerals can be seen as the alternative to getting funeral insurance because they cover your funeral services regardless of how much they cost at the time. We’ve listed some ways to finance prepaid funerals.
- Contributory funds. Depending on your arrangements with the funeral home director, you can make smaller payments towards a funeral service.
- Pre-purchased products. These can include a cemetery plot, a wall niche or a lot in the memorial garden at a crematorium.
- A prepaid funeral plan. You can choose your preferred type of funeral service and pay for it either in full or by instalments over a fixed period. Bear in mind that very few – if any – funeral plans offer a refund upon cancellation, so check carefully before you commit to one.
It’s worth comparing different prepaid funeral packages before you decide to purchase one, as they differ between funeral homes – much like funeral insurance policies can vary between providers.
What about life insurance?
Life insurance payouts are typically more than adequate to help cover funeral costs. In addition, a life insurance policy ensures your beneficiaries are taken care of now, and in the future.
Here at comparethemarket.com.au, we believe life insurance is something that we should all consider, as it can give you peace of mind that your loved ones are protected should the worst happen. You can also take out life insurance as a standalone policy or through your super fund.
If any of the above topics resonate with you, you can read more about how life insurance works. And if you’re familiar with that subject, you can compare policies on our website.