Insurance to meet future costs

Funeral insurance is much like any other type of insurance. You pay regular premiums – weekly, fortnightly or monthly – for a fixed amount of cover that will be paid to your beneficiary when you die.

With funeral insurance, you’re not saving for funeral costs. Rather, you’re buying insurance to meet those costs at a future date.

Unlike taking out insurance for other life occurrences that are unknown events (for example, a house fire or car accident), we all know that we will die one day. But because we don’t know when we are going to die, when taking out funeral insurance you need to think about whether you can afford the policy over the next 10, 20 or more years.

Increasing premiums

With funeral insurance you’ll not only need to keep making payments over the years, but the premiums may increase as you age.

If the premium payments become unaffordable and you stop paying them, the policy will be cancelled – and it is possible that you will not get back any of the money you have paid towards the policy. Different insurers have different rules, so be sure to read the Product Disclosure Statement carefully before taking out the policy.

Things to consider

Before taking out funeral insurance, be sure to consider whether it’s actually worth the money. Will you be paying more for the insurance than the funeral will actually cost? Will your premiums increase and will you be able to continue paying them? Remember, think long term.

Pros of funeral insurance

  • You will be covered from day one, however most policies only cover accidental death for the first year or two
  • Insurance is a familiar product and may suit you if you aren’t sure you can save a sufficient amount for your funeral costs.

Cons of funeral insurance

  • Premiums may increase over time. This means that what may have started out as a more affordable option becomes expensive, especially if you are living on a fixed income
  • If you can no longer afford to pay the premiums or cancel your policy, you’re unlikely to receive a refund of the premiums you’ve paid
  • If you live for a longer than an expected number of years, you may end up paying more in premiums than the cost of a funeral
  • Most insurers only cover accidental death in the first year or two of the policy, so if you die from another cause during this period you may not be covered
  • Sometimes it can take a while for the beneficiaries of the policy to receive the insurance payout to cover the funeral expenses.

The information on this page is a guide only. For advice about your specific needs, please consult your financial advisor.

Talk to the team at Walter Carter Funerals about your funeral insurance needs.

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