Although we may not like to think about it, but our children and loved ones may have to pay for our funeral. Much like any other life celebration, a funeral is seldom a cheap or thrifty affair. Like a christening or wedding, there are many expenses one has to face, which can be all the more a burden during a time of loss and grief.
If you are a senior, what is funeral insurance and how does it work? What does it cover? Is it the right choice for you and your family? We delve into the nitty gritty of funeral insurance so you can make an informed decision.
How seniors’ funeral insurance works
Seniors’ funeral insurance (or just funeral insurance) is similar to paying for life insurance. In the event the policyholder passes away, a lump sum is given to your family or nominated party to help pay for the funeral service and necessities. In most cases, funeral insurance premiums usually pay out between $5,000 and $15,000.
Some life insurance policies may be able to fund a funeral; however comprehensive life insurance for seniors (over 65s) can be expensive, so funeral insurance may be a cheaper option.
What seniors’ funeral insurance can pay for
Funeral insurance usually covers all aspects of a funeral, depending on the level of cover and budget your have set for your family to follow. Funerals, much like weddings, can be simple or extravagant based on the wishes of the deceased and the customs of the family.
Funeral insurance covers the costs of hiring a funeral home and director, cremation or burial fees, transportation, flowers and wreaths, the casket or urn, venue hire for wakes or post-funeral gatherings, headstones or plaques, pre-funeral storage, and the death notification in the newspaper or online.
What events are covered under seniors funeral insurance
Many different events are covered under funeral insurance. The first and foremost being natural causes or related illness and/or chronic condition. Keep in mind that almost every funeral insurer won’t cover a claim within the first 12 months of any type of policy, so buying funeral insurance earlier (say, at age 60) rather than later will ensure coverage.
Likewise, if you are diagnosed with a terminal illness within the first 12 months of purchasing a policy, your insurer may refund your premiums instead of honouring the entire claim. Accidental death may also not be covered under funeral insurance; and if it is, the same 12 months waiver period applies.
Each funeral insurer has different restrictions on what is and what isn’t covered, so make sure you make a comparison with several insurers to select the right one for you. You should also consider the cost vs. benefit your family is entitled to. To make a fair comparison, you should visit a funeral insurance comparison site: https://www.savvy.com.au/funeral-insurance/seniors/
Pre-paid funerals and funeral bonds
One alternative to funeral insurance is paying for your funeral in advance. One can plan their funeral ahead of time and relieve the burden on their family when the time comes. However, these can be costly and require full upfront payment. Another way to finance a funeral is with a funeral bond. This is a fund that is independently managed, accumulates interest or capital, and is released to a funeral director or estate. In some cases, it may be counted towards your asset test to qualify for the Commonwealth age pension.
If you’re unsure about whether your funeral bond is exempt from the asset test or not, you may want to consult an accountant or Services Australia.
Whatever you choose, covering your funeral can give you and your family greater peace of mind.
