Do I take out Life Insurance or Funeral Insurance—or both? Here are the key differences between Life Insurance 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.
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 spouse, and other adult members of your family, such as your parents.
Eligibility for Life Insurance, on the other hand, is usually based on factors like your age, medical history, whether you smoke, and other health- and pastime-related considerations. These factors affect whether you’re able to take out a life insurance policy and 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 the income you would have provided for your family, 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 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, it may include a feature 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 assessment of your personal circumstances.