Is Funeral Insurance Worth It?

When someone dies, the cost of funeral arrangements can come as quite a surprise. It is easy to understand why many people make the decision to purchase funeral insurance or over 50s cover to pay for all or part of the costs associated with their final expenses.

Your loved ones won't have to stress about finding the money for your funeral expenses if you've already paid for them in advance, but is this an efficient way to plan for the future financially?

It can be challenging enough for some households to meet their day-to-day financial obligations without adding the burden of contemplating estate planning or how they will one day pay for their own funerals.

The topic of death can be unsettling for some people, and the thought of paying one's final bills can make that feeling even more intense.

In the event of their passing, many people want their life insurance to pay for any burial or funeral costs as well as contribute to their families' financial security by providing an income stream.

Others, on the other hand, are looking for specific plans that will pay for the kind of burial they want as well as any other arrangements they might want to make. For some people, the benefit of having insurance is that it helps them plan for where they will be laid to rest after they pass away.

On the other hand, for some people it might be a waste of money. Is it financially beneficial for you to purchase funeral insurance? What about insurance for your burial? The following are some important aspects to take into consideration. Peter Tziotzis Orthodox Funeral Directors are here to help make the funeral process as smooth and stress-free as possible for you and your loved ones.

What Is Funeral Insurance?

You can protect your loved ones from the financial burden of paying for your funeral expenses by purchasing a policy known as funeral insurance.

It is also sometimes referred to as "Funeral Plan Insurance" or simply "Funeral Plan." To cover the cost of a funeral, you typically have a range of options, typically between $5,000 and $15,000, based on the type of funeral service that you would like to have.

After your passing, this money will be transferred to the friend or member of your family that you have designated as the beneficiary of the account.

Insurance for the funeral is nothing more than a prepayment plan for the costs of the service. You contribute an agreed-upon amount to the plan, and the provider will then cover a portion of the costs associated with the funeral.

If you pass away before you've paid off the full amount, it's possible that your family will be responsible for the remaining balance on the bill.

There are a few possible outcomes that could result from implementing your plan:

• Lump-sum – You pay the full amount up front, so your family and friends won't have to worry about making up the difference if there is one.
• Twelve months – This not only allows you to spread the cost over a longer period of time, but it also reduces the likelihood that your family will be responsible for paying the difference if you pass away at an earlier age.
• Pay monthly for up to 30 years – You may be able to pay for certain plans in manageable instalments if you select the right strategy. Once more, your family will be responsible for covering any balance that remains.

The majority of insurance companies will let you sign up for a plan once you reach the age of 50, but there are some that are open to people who are much younger.

It is a good idea to make preparations in advance for how your funeral will be paid for, as this will save your family both money and stress when the time comes. However, it's possible that funeral insurance isn't the best choice for you.

As is the case with life insurance, funeral insurance typically requires that you continue to pay the premiums in order to maintain your coverage. Accordingly, you need to evaluate whether or not you will be able to afford funeral insurance over the next 10, 20, or even more years.

People who have funeral insurance typically pay more in premiums than the insurance company pays out in benefits when the policyholder passes away.

Under certain plans, the cost of the funeral insurance policy will go up as the insured person gets older.

It is essential that you have a solid understanding of the fact that, in most cases, if you cancel the funeral insurance policy, your premium payments will not be returned to you.

If you really want to make the most of your money, you should put it in the bank.

What Exactly Does Funeral Insurance Cover?

All funeral plans include the costs of a funeral director's services, which include care and transportation of the deceased, as well as the purchase of a casket.

Some plans also include coverage for the costs of visiting the deceased in a chapel of rest, paying doctor's fees, paying crematorium fees, and paying for the services of a celebrant or minister.

Regardless of whether you plan to bury your loved one or have them cremated, you can use funeral insurance. However, burial is typically more expensive than cremation, and the costs of the plot and the headstone are typically not covered by the insurance; consequently, these are significant sums that need to be paid at the time of passing.

In most cases, the insurance coverage will not extend to include embalming, floral arrangements, catering, or notices about the funeral.

Therefore, if you also want to cover these additional costs in advance, you may want to consider establishing a separate savings fund in order to do so.

Things to Consider

Check to see if the cost of the funeral insurance is going to be worth it before you purchase it.

• Will the insurance premiums end up costing you more than the actual cost of the funeral?
• Think about the fact that as you get older, it is likely that your income will decrease while your expenses, such as the cost of medical care and home help, will increase, and it is possible that you will no longer be able to afford the premiums that you are currently paying. If you are thinking about terminating your contract in five years, a good question to ask yourself is "will I get my premiums back?"
• Will there be an increase in your premiums, and if there is, will you still be able to pay them? The question "what will my premiums be in 5 years?" is an excellent one to ponder. Think about the long term, and keep in mind that if you are unable to maintain the payments, it is likely that you will forfeit all of the money that you have paid towards the insurance policy.
• To estimate how long you will live.
• Standard policies for funeral insurance cover accidents only for the first year of coverage. This means that if you pass away, no benefit will be paid out to your beneficiaries unless your death was the result of an accident. Keep in mind that this will likely still apply even after you have switched from one policy to another.
• Your family may have to wait for some time in order to receive the payout from the insurance policy in order to cover the costs of the funeral.

Main Problems Associated With Funeral Insurance

It is possible that the amount of money paid out in insurance benefits will be less than the amount paid out in premiums. If you cancel the funeral insurance policy, you will usually not get your money back.

There are a lot of different funeral plans, and many of them are "stepped" policies, which means that the premiums for the insurance will go up as you get older.

Unless you pass away within the next 5–10 years, you will end up paying more money out of pocket than the amount that will cover the cost of your funeral.

If you end up having to rely on your pension as your primary source of income, it is highly unlikely that you will be able to continue paying the ever-increasing premiums for this insurance product. If you are unable to keep up with your payments, your policy will be terminated, and you will be out any money that you have contributed towards it.

Increasing Premiums

Not only will you have to continue making payments over the course of the years, but your premiums will likely increase as you get older and continue to rise over time.

Should you find that you are unable to afford the premium payments and decide to stop making them, it is likely that your policy will be terminated.

The money that you have already contributed towards your policy will not be refunded to you. Before you sign up with an insurer, you should carefully read the Product Disclosure Statement to familiarise yourself with their policies and procedures.

Funeral Insurance Can Be Misleading for Consumers

Marketing 

The daytime television market is almost completely saturated with advertisements for funeral insurance. With catchphrases like "Don't leave your family with financial stress," these advertisements are directed towards the elderly and the vulnerable members of society. Peter Tziotzis Orthodox Funerals offers a full range of funeral services to help make this difficult time a little bit easier for you and your family. 

Point of Sale

In the examples that we have seen, consumers who are more likely to be vulnerable are being misled about the costs of the premiums.

In particular, consumers are not informed that the premiums will rise or the extent to which they will increase when they enter these contracts over the phone. Moreover, consumers are not informed that the amount by which the premiums will increase.

A significant number of our customers have expressed to us that they would not have purchased insurance in the first place if they had been aware that their premiums would have nearly doubled within five years after they had initially purchased it.

False Assumptions

A significant number of individuals who contact the Insurance Law Service are under the impression that the insurance provider stores the premiums they pay in some kind of account, possibly analogous to an endowment policy.

It is absolutely necessary to have a solid understanding that this is not how funeral insurance works.

Consider that the premiums for funeral insurance are similar to the monthly payments you make for other types of insurance, such as auto insurance. In most cases, if you cancel the contract, you will not receive the bonuses that were promised to you.

Paying for More Than You Get

One of the dangers associated with purchasing funeral insurance is the possibility that the premiums you pay will be greater than the benefits you receive. For instance:

• Even if you have already paid the amount of the benefit to the insurer, the vast majority of policies for funeral insurance require you to continue paying premiums until the day you pass away.
• In some policies, the total amount of the premiums you pay cannot exceed two times the value of the benefits you receive.
• You might be required to pay higher premiums for certain policies if you want to avoid further payments after the benefit amount has been reached.

It is stated in the fine print of some insurance policies that "the benefit will never be less than the total premiums you've paid for each life insured."

It appears that once you have paid the benefit amount, you will no longer be required to make payments under the policy. You will typically be required to keep making payments, but any money paid in excess of the benefit amount will be given to the beneficiary of your choice after you pass away.

BUT... if you cancel the policy prior to your death, then there will be no payment made to your beneficiaries.

Once Signed Up

Once a consumer has signed a contract, the majority of them are hesitant to back out of it, and some of them are even willing to put up with significant adversity rather than breach an agreement they have already committed to honouring.

Pre-planning is the most effective method for controlling the costs of a funeral. Check out our information on Prepaid Pre-Planned Funeral options if you're interested in learning more.

Alternatives to Funeral Insurance:

Prepaid Funerals

It is possible that this will be the best choice for you, particularly if you won't be able to relocate to a different state before you pass away and the company is well-respected. Be sure to read the small print. You can make payments in instalments to a lot of different businesses these days.

High-Interest Savings Account

Because of the following three considerations, establishing a joint bank account in your name and the name of a family member can be an easy and efficient method for paying for your funeral:

• To begin, you have the option of making a modest payment once every two weeks, the amount of which is determined by what you are able to pay at any given time.
• Second, a member of your family can get access to those funds as soon as they are required for your funeral, in contrast to the process of receiving insurance payments, which can take some time.
• Third, even if you miss a few payments or stop making payments altogether, there is no danger that your payments will be forfeited. This is because there is no way for your payments to be tracked. Your money is protected and will continue to earn interest even if you withdraw it now.

Funeral Bonds

A financial instrument that accumulates interest as it is invested.

Super

If you have super, then when you pass away, your family will receive any remaining balance in super as well as any life insurance benefits associated with that super.

It is possible to put this money towards the cost of a funeral, but it might be some time before you see any of it.

On the other hand, if members of your family pay for your funeral expenses, they may be eligible for reimbursement once probate is granted. Talk to the people running your super fund to find out what approach they take. Arranging a funeral in Melbourne can be difficult. That's why Peter Tziotzis Orthodox Funerals is here to help guide you through the process and make sure that the wishes of your loved one are fulfilled.

Getting Super Released Early

You might be able to get access to your death benefit early to cover the costs of the funeral in certain situations, such as if you have an illness that is terminal.

It's possible that you can access your retirement benefits early in order to help pay for the funeral costs of a dependent.

Visit the webpage on the early release of superannuation that is maintained by the Department of Human Services, or check out getting super early for more information.

If You Are a Veteran

There is a possibility that the Department of Veterans Affairs (DVA), your trade union, or the government of your state or territory will provide financial assistance to cover the costs of the funeral. Please refer to the publication titled "What to Do When Someone Dies" 13 32 54 published by the DVA (1800 555 254 for regional callers).

If Your Family Is on Centrelink

There is a possibility that the Department of Human Services will make a bereavement payment available. Visit their website for information on what to do in the aftermath of a death, or call 13 23 00. (1800 810 586 for TTY service).

Advantages of Funeral and Burial Insurance

In certain circumstances, having coverage of this kind can be a very beneficial thing to have. A standard life insurance policy is not something that can be purchased by everyone.

Those who suffer from debilitating conditions such as diabetes or emphysema, as well as those who work in dangerous professions such as law enforcement, firefighting, or high-rise construction. Obtaining life insurance can be challenging for individuals who are on the older side of life.

In situations like these, having funeral and burial coverage can help offset some of the costs of your final expenses for the people you love.

If you are approaching retirement age or are already over the age of retirement and you have never saved money for your final expenses, purchasing burial insurance may be an option for you to consider.

You might choose to purchase a modest burial policy as an alternative to placing the financial burden of those costs on your loved ones.

Even if you already have another life insurance policy, purchasing a separate funeral policy can guarantee that the full amount of money from your life insurance policy will be distributed to your beneficiaries so that they can use it however they see fit, rather than taking a portion of that money to cover your final expenses.

Disadvantages of Funeral and Burial Insurance

You have probably recognised at least some of the negative aspects by this point. Many people choose not to purchase funeral insurance because it is so prohibitively expensive in comparison to other types of life insurance.

Instead of spending your money on monthly premiums for a policy that, according to some, can be difficult to make claims on, some financial experts say it is better to put your money into an account that earns a high interest rate for savings, or even under your mattress, where it will earn a higher return.

The contestable period, which is typically around two years after you start coverage, is included in many different types of funeral policies. If you were to die during that time period, the insurance company is obligated to conduct a death investigation.

In the event that it is discovered that you were diagnosed with a medical condition that you did not disclose on your application, for example, the death benefit that was intended for your family could be withheld from them.

Even policies with a cash value come with certain drawbacks. Even if you make payments into the procedure for thirty years or more, investment professionals estimate that the cash value policy will only generate a return of one percent to three percent for you.

If you intend to use the money at a later date by cashing in the policy before your death, you will make a much larger amount of money if you investigate alternative investment opportunities.

Other Options to Consider?

You should investigate term life insurance before investing in an expensive burial policy. Term life insurance is more affordable.

Not only are term life insurance policies much more affordable than other types, but they also typically provide coverage that is three times greater for the same price.

There is no cap on the number of term insurance policies that a person can hold.

You can purchase multiple term life insurance policies, each of which can serve a different purpose; you can also designate a different beneficiary for each policy, depending on what you want the policy to cover in the event of your passing. Peter Tziotzis Orthodox Funerals provides professional burial services in Melbourne. We understand that the death of a loved one is a difficult time, and our team is here to help you through every step of the process.

You could also put the funds that you would have used to purchase insurance into a money market account or another type of savings account. You should put it in the savings account rather than naming your designated funeral coordinator as a joint owner or authorised signer of the account.

It may take longer to reach the desired amount, but it will save your family from having to go through an investigation, which is an alternative to the risk of not having the benefit paid out.

Life Insurance Vs Funeral Insurance – Which Is Better?

Both life insurance and funeral insurance are available with no medical exam required, and both can cover the costs associated with a funeral.

If you decide to get life insurance, you will most likely be offered an over 50s cover option. There is a possibility that it will come with a funeral assignment, which will set aside a certain amount of the sum assured (payout) for the funeral.

If you have coverage for people over the age of 50, you will have more leeway to decide how and where the funeral will take place.

It is merely a lump sum that the beneficiary is free to spend however they see fit. They could put the payment towards the payment of other fees as well.

The fact that the plan is not protected against inflation is a drawback. This means that if the price of funerals goes up in the future, your family will be responsible for covering the difference.

Have a discussion with a financial advisor about purchasing life insurance, and find out if you can negotiate a better price than what you would receive from a funeral plan.

Conclusion

Although there are experts to be found on both sides of the debate regarding funeral insurance, the fact of the matter is that no one but you can decide whether or not you require a policy.

If you are unable to obtain life insurance or if you believe that your passing will place your loved ones in a position where they will face significant financial challenges as a result of your passing, you may wish to consider purchasing burial insurance.

Do you need assistance in making funeral preparations for a loved one? You have nothing to worry about because Peter Tziotzis Orthodox Funerals in Melbourne has everything under control.

However, if you have some savings set aside for unexpected expenses or if you are able to obtain a regular term life insurance policy, it may be a much better buy for you in the long run.