The Difference Between Life and Funeral Insurance

If you’re looking for an insurance policy to help your family in the event of your passing, then you may have asked yourself: do I take out life insurance, funeral insurance – or both? The answer depends on your needs and the needs of your family.

Life and funeral insurance are similar in many ways. Both require you to pay regular premiums. Both will provide your family with a payout upon your death. And both will help ease some of the financial burdens that can arise after you pass away.

However, there are still some key differences, mainly to do with eligibility, the level of cover on offer, and what the payment is intended to be used for. Understanding these differences will help you decide what kind of policy is best for you and your family.

Eligibility

Generally speaking, Funeral Insurance is available to any adult that fits the age requirements for taking out a policy that is outlined by the insurer. Often it can cover you, your adult spouse and other members of your family all on the same policy.

Eligibility for Life insurance, on the other hand, is usually based on factors like your age, medical history, whether you smoke and other health related issues. These factors affect whether you’re able to take out a life insurance policy and also what your premiums will be.

Level of cover

Funeral insurance policies usually have a maximum cover amount of $15,000 and while this can be used to cover debts or make other payments upon your death, it is intended to help cover the cost of your funeral.

With life insurance, you’ll generally be insured for a higher amount of cover compared to funeral insurance, because it’s designed to help replace some or all of the income you would have provided for your family until retirement, instead of just enough to cover the funeral.

What the insurance payout is used for

A funeral insurance policy could be right for you if you need to plan for the cost of your funeral, but don’t need to support anyone on an ongoing basis. You might choose funeral insurance if you have no dependants, or if you’re no longer earning any income that needs to be replaced.

However, you might choose to buy a life insurance policy for the long-term financial security of dependants, like children, a spouse or disabled family members who rely on your income to get by. Life insurance could also be a good idea if you have ongoing financial commitments, like a mortgage, that your family will have to take care of when you’re gone.

Should I buy both life insurance and funeral insurance?

If you have life insurance, you may have the option of an advance payout to help cover funeral costs in which case you may decide not to buy a separate funeral insurance policy.

If however, you are not eligible for Life Insurance or do not need the additional benefits provided, you may decide to purchase funeral insurance only.

Ultimately, the best form of insurance, and what you should buy, will depend upon your personal circumstances.

Here is a summary of the differences between Insuranceline’s Life Insurance and Funeral Insurance

 

Life Insurance

Funeral Insurance

Eligibility

Australian Residents aged 18 to 65

Australian residents age 25 to 80 can get a Funeral Insurance quote online or over the phone in minutes.

Cover

$100,000 - $1,500,000

$3,000 to $15,000

Death

Accidental Death for the first 12 months of cover

Any cause of death after the first 12 months of cover

Terminal
Illness

Χ

Nominated
Beneficiaries

Premiums

Based on your age each year you hold the policy and generally increase as you get older.

Based on your age when you take out the policy and generally don’t go up each year just because you get older*. The cost will change if you make changes to your policy, such as increasing the Cover Amount, adding optional Benefits or other people to your Policy.

Exclusions

Suicide and intentional self-injury are not covered during the first 13 months of cover. If any other exclusions are to apply, we’ll discuss them with you first.

Please see our Combined Product Disclosure Statement (PDS) & Financial Services Guide (FSG) for full details on what is and isn’t covered by the policy.

When your cover starts you are only covered for Accidental Death for the first 12 months.

Exclusions on Accidental Death Cover - Claims that result from participating in unlawful activity, acts of war, undertaking a dangerous occupation or dangerous pursuits and death by self-injury or suicide, injury as a result of any self-inflicted act including attempted suicide, the taking of intoxicating liquor or drugs other than as prescribed.

Please see our Combined Product Disclosure Statement (PDS) & Financial Services Guide (FSG) for full details on what is and isn’t covered by the policy.

Optional
Benefits

-  Optional Major Illness Cover

-  Optional Cancer Cover

-  Optional Serious Injury Cover

- Accidental Death Cover up to $50,000 - extra financial support for your family if you pass away as a result of physical injury caused by an Accident.

Other Features

- Advance payout of $10,000 on approved claims to help with legal and other unexpected costs. 

- Life events feature allows you to increase your cover amount along with the changing needs of your family, like taking out a new mortgage, or having a baby.

- Value Promise - Our Value Promise means that at the time of a claim for the Funeral Insurance Benefit, we’ll pay the Funeral Insurance Cover Amount, plus any Bonus Cover, or 100% of the premiums paid toward your Funeral Insurance cover – whichever is greater. 

If you are looking for a lower cost option, you may choose a 70% Value Promise so that at the time of a claim for the Funeral Insurance Benefit, we’ll pay the greater of the Funeral Insurance Cover Amount, plus any Bonus Cover, or 70% of the premiums paid toward your Funeral Insurance cover.+

- Early Payout Option on the policy anniversary - After you turn 85 you can choose to cash in your policy and receive 120% of the average Funeral Insurance Cover Amount, not including Bonus Cover.#

Discounts

Family Discount - Add another adult to your policy and the youngest person will receive a 5% discount.

Higher Cover Discount - Get a 10% discount on your premium for Life Cover from $200,001 to $400,000 plus a 15% discount on your premium for cover over $400,000. Does not apply to Basic Life Cover.

Enjoy 12 months for the price of 11 when you choose to pay your premiums annually.

10% Bonus Cover after 5 years to reward your loyalty at no extra cost.~

A 5% Loyalty Discount will apply after the 10th anniversary of cover or the Policy Anniversary after a Life Insured’s 84th birthday, whichever happens first

Get a 5% discount when you add another adult under the same funeral insurance policy. Does not apply to Accidental Death.

Enjoy 12 months for the price of 11 when you choose to pay your premiums annually.

 

Looking for more information?

Get an online Life Insurance quote now

Find out more about how life insurance works here

Looking for more information?

Get an online Funeral Insurance quote now

Find out more about Funeral Insurance for your parents here

Find out more about Funeral Insurance for seniors here

 

 

*The premiums may change if you make changes to your Policy or if the underlying premium rates are changed by us. However, you will never be singled out for a premium rate increase.

+Highest payout is paid on receipt of a valid claim and is calculated on your Funeral Insurance Cover Amount or premiums paid toward your Funeral Insurance cover. The Insuranceline Value Promise does not apply where the cause of death is excluded, such as death other than Accidental Death in the first 12 months of cover. Read more about the Insuranceline Value Promise in the PDS.

# After the Policy Anniversary following a Life Insured reaching age 85, the Policy Owner can cash in the policy and receive a payout of 120% of the Life Insured’s average Funeral Insurance cover amount, excluding Bonus Cover, Accidental Death Cover. The Early Payout Option may affect entitlements to the age pension and other government benefits.