Find out the truth about Funeral Insurance
Published on Thu Aug 27 2020 in Money
With the cost of funerals going up, many people worry about leaving this expense for their loved ones. An average funeral costs $8,000 - $10,0001 in New Zealand – and sometimes much more. And it’s an expense that often comes unexpectedly and needs to be paid for at short notice.
Some people think that the government will foot the bill with Work and Income’s Funeral Grant. However, eligibility to receive the Funeral Grant is income and asset tested and if you have a surviving spouse or partner, their income and assets will also be taken into consideration.
How does funeral insurance work?
As the name suggests, funeral insurance is a policy that is designed to help cover the cost of a funeral.
The lump sum benefit is paid to the person(s) the policy holder chooses when they pass away. Or, if you are the policy holder who has taken out a policy for your partner or another relative, the benefit is paid to you, when their time comes.
Whilst most people probably do use the benefit they receive for the memorial service and burial or cremation, they actually have the freedom to use the money for anything they like. This might include settling final debts or paying bills that the deceased has left behind.
Claims are usually paid quickly, within 24-48 hours of all the paperwork being received, so the money is there for your loved ones when they need it most.
Why do people buy funeral insurance?
As the cost to be laid to rest varies depending on where you live, many New Zealanders wonder how they can realistically cover this expense.
In some situations, personal savings or emergency funds might have already been used up to help cover medical bills, at-home care or the cost of taking time off work beyond normal annual or bereavement leave, so there’s little left in the bank.
But what about life insurance instead? It is really up to you to decide what cover suits your needs. With life insurance, premiums generally increase each year as you get older. Life insurance applications also have a number of health and lifestyle questions, and depending on your answers, you may be asked to provide supporting documents before you can get cover.
With funeral insurance, premiums can be level, so don’t increase each year because of age. It is also generally, guaranteed acceptance with no medicals or paperwork to apply.
Are there any risks?
Most funeral insurance policies have a stand-down period in the first 12 to 24 months. During this period, only death by accident is covered. If you happen to pass away as a result of any cause other than an accident during the stand-down period, most insurers will refund all premiums paid.
As with other types of insurance, there is the possibility that the amount you pay in premiums could exceed your insured amount, as a recent report from Consumer NZ found. And as insurance isn’t a savings or investment plan, there is normally no refund if you pay more than your insured amount.
Getting covered
Taking out funeral insurance is generally a pretty straightforward process. You can take out funeral insurance over the phone, or sometimes online depending on the insurer.
About Author: Momentum Life is a leading provider of Life insurance and Funeral insurance in New Zealand.
1. Citizens Advice Bureau NZ “What are some of the normal costs of a funeral?”, 3 July 2018.
The content provided in this article is for information purposes only. The information is of a general nature and does not constitute financial advice or other professional advice. To the extent that any of the content constitutes financial advice, it is limited to Momentum Life products only and does not consider your specific financial needs or goals. You should consider whether the information is appropriate for you and seek independent professional advice, if required.
All product information is correct at the time this article was published. For current product information, please visit the Momentum Life website.