When you’re getting on with life, thinking about your funeral expenses is probably the last thing on your mind. Yet you may be surprised to learn how much the average funeral costs these days. Even the most modest service can be expensive, starting from $4,000 for the essentials up to $15,000* for something more elaborate. It’s not so surprising when you consider all the different elements that may need to be arranged:
That’s before you start thinking about the kind of wake you’d like, which can be anything from a few drinks at the local to a big affair requiring a venue, catering and an event organiser.
Sorting out your funeral expenses in advance is just another great thing you can do for your loved ones. If you want to make it easier for them, you have several options: take out funeral insurance; pre-pay with a lump sum or regular instalments; or buy funeral bonds. Let’s take a look at how these different options work:
Funeral insurance is one way to ensure your funeral can be easily paid for. Like other types of insurance, you pay regular premiums (ongoing payments) for a fixed amount of cover (usually between $6,000 and $15,000). The cover amount is paid to your beneficiary (the person you want the money to go to) when you die.
Funeral insurance policies can vary a lot between providers, so it’s important to find out as much as possible about the plan you’re considering before you sign up. This can be a bit of a minefield if you are new to the whole thing. When researching funeral insurance, there are a few important questions you should ask your insurer.
Find out if the premiums (regular payments) will increase over time
With most insurance companies, your premiums will increase as you get older. InsuranceLine has funeral insurance with level premiums, which means that you’ll always know how much you need to pay and that the amount you pay today will be the same next year and the year after, no matter what (unless you make changes to your policy).
Check to see how long the insurance payout will take to come through if you need to claim
Some insurance companies can take a while to pay a claim. You really shouldn’t have to wait long and with InsuranceLine, you’ll generally receive a pay out within 24 hours of sending in a complete claim.
Can I change my mind once I’ve purchased a policy?
You should always be able to feel comfortable with your decision and a cooling off period is something all insurers have to offer. Many insurers offer 14 days but at InsuranceLine you’ll have the time you need to make extra sure you want to continue with the policy with a 30 day cooling off period.
Is it possible that I’ll pay more in premiums than will be paid out at claim time?
As with any insurance product, it’s possible that you may pay more in premiums than you are covered for. To make sure you don’t pay too much, InsuranceLine has a couple of different payment options and we can arrange it so you won’t pay more in premiums than you’re covered for.
With a pre-paid funeral you can plan and pay for your funeral in advance and lock in the cost at today’s prices. You can also choose to pay up front and leave the details of the funeral service for your family to decide on later.
There are usually two payment options – either pay in full with a lump sum or pay in instalments. If paying in instalments, an initial payment may be required up front. It’s best to shop around as funeral directors offer different packages – ask for a full description of the costs to see exactly what you are paying for.
The downside is that it may be difficult if you move interstate or want to change your funeral plans later on – check if you can transfer before you sign up.
A funeral bond is another way you can help meet the costs of your funeral. Funeral bonds are like an investment that can only be withdrawn after your death. You can invest in a bond either directly through an investment company or from a funeral director.
The bond you pay is an investment towards the cost of your funeral, but doesn’t guarantee against rising funeral prices, so it may need to be topped up by your family. If you need, you can usually pay for the funeral bond in instalments, but make sure you understand all the costs – read the bond's prospectus carefully before you make a decision. The good news is that money invested in a funeral bond is not subject to the asset or income test for the Age Pension.
Not many people like thinking about their own funeral but if you do want to sort it out in advance, there are a number of options so make sure you check them all out carefully and decide what the best one is for you.
Read more about Funeral Insurance from InsuranceLine or call us on 13 77 87 and we’ll be happy to answer all of your questions.
*Money Smart, Australian Securities & Investments Commission, 2012