What is the Purpose of Funeral Insurance Cover?
Funeral Insurance provides a financial benefit to your family in the event of your death, providing great financial security at a stressful time. This payment can come as great relief in this difficult time as it ensures your family can pay for the funeral service they want and focus the families finances towards other expenses. This benefit is paid as a lump some payment with applicant able to take out between $5,000 and $30,000 in intervals of $1,000.
In comparison to most other forms of personal insurance, applicants are not usually required to undertake a medical examination. Funeral Insurance can be a good option for applicants that have struggled to successfully take out life cover in the past in the event that they were considered too great a risk for insurance providers.
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Who is it for?
Singles with no dependants
People with financial dependants
Working or retired senior citizens
People who are looking to cover their funeral, but do not wish to take a out a full life cover policy
When is the Benefit Paid?
In the event of your death, the cover for your funeral costs up to the insured benefit amount will be paid.
How is funeral insurance paid?
A lump sum payment is paid to the estate, to cover the immediate costs of your funeral.
Documents required for benefit to be received:
When will I get the payment?
You will generally get the payment within 24 hours of a successful claim
What are the key features of funeral insurance?
Who is eligible to take out funeral protection?
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It is critical for anyone looking to take out funeral insurance to assess if they would be better off relying on funds in their super or savings to cover the cost of their funeral. Applicants must always have a clear understanding of the conditions of the policy they are looking to take out before submitting their application.
The Key Features of Funeral Insurance
A funeral policy is much more than simply a benefit payout to allow your family to pay the funeral director when you die. Instead, funeral cover can be very comprehensive if you choose the following options:
Policy holders can generally insure themselves anywhere between $5,000 and $30,000 per month in increments of $1,000
If you name a family member as the beneficiary of your policy, they will receive the benefit payout when you die, and they can easily use that money to plan and pay for your funeral.
You can either take out a standalone funeral protection insurance policy, or you can have a life insurance policy that has concessions to pay for your funeral from the benefit payout.
Policyholder will generally stop paying premiums at 90 years of age, after which the cover will continue for life.
Policyholders do not have to undertake medical exams in order to receive cover as is often the case for life and income protection insurance.
With a policy offering a graded benefit the amount of coverage increases over time. The amount of the increase and the frequency of the increase differs between providers.
With a traditional whole life policy you are covered for a death benefit for as long as you continue to pay the premiums, and when you die, your beneficiaries can use a portion of the benefit amount to pay for your funeral expenses.
Most policies will provide cover 24 hours a day, seven days a week, worldwide.
If the policyholder maintains policy payments and other obligations, policies can rarely be cancelled by providers.
If the policyholder dies from accidental death within the first 12 months, the full sum-insured will be paid. If death occurs after the first 12 months of the policy being taken out, the policyholder will be entitled to 3 times the benefit amount.
If insured dies within the first 12 months and death is not due to accident or self-inflicted injury, all premium payments to date will be refunded.
Most policies will come with a 45-day cooling off period so you can be sure you have found the right cover.
The table below shows a standard structure for funeral insurance benefit payments
|Cause of Death||First 12 Months||After 12 Months|
|Accident||Benefit Amount Paid||Three Times Benefit Amount Paid|
|Suicide||No Benefit Paid||Benefit Amount Paid|
|Self Inflicted||No Benefit Paid||Benefit Amount Paid|
|Sickness||Refund of Premiums Paid||Benefit Amount Paid|
Additional Benefits You May be Able to Receive on Your Funeral Insurance Plan
When you take out a funeral protection policy you can choose a single or a family option. The family option will allow you to cover yourself and your partner. A separate policy can be taken out for any children you have who are under 21 years old and are dependent on you.
It is also beneficial to take out funeral insurance as soon as you can because once you are insured you can keep the policy for life, and as long as your premium payments don't lapse you will be covered.
When it comes to the benefit amounts and payout you will want to consider the following features:
- Policy discounts. Some insurers will offer you a discount on your premiums if you take out a certain amount of cover. For example, a funeral protection insurance policy with a benefit amount of more than $20,000 may receive a 10% discount on premiums. You may also be able to negotiate a discount on your policy if you have multiple policies with the same insurer.
- Premium waiver. You know that insurance premiums must be paid for the insurance to remain current, but many policies will cease charging premiums when the oldest person on the policy reaches 90 years of age.
- Automatic increases. The cost of everything goes up, year after year and the chances are good that the amount of benefit you choose now will buy less in the future when your beneficiaries make a claim to pay for your funeral. Therefore, to ensure that your benefit retains its value, a funeral protection plan can include an automatic increase every year, usually of 5% to keep up with inflation. This increase will occur every year on the anniversary of the day your policy became active, and will continue to increase even after the maximum benefit amount has been reached or exceeded.
- Coverage period. Your cover will start from the date your application is accepted by the insurer, which may be different to the date you pay your first premium as you can often choose which date you want to pay your premium on each month. Funeral insurance will cease coverage when a death claim is made, for a dependent child who reaches the age of 21, if you cancel the policy or fail to pay your premiums, or if your insurer cancels the policy.
- Benefit pay out. The benefit will be paid to your family or beneficiaries in a lump sum amount in the event your death is eligible for a pay out.
Dale Maroney on Why it is Important to Prepare for Your Funeral Early On
Be Aware of Terms and Conditions on Your Funeral Insurance Policy
- It is important to remember that you may only be covered for an accidental death in the first 12 months of taking out your policy, but after 12 months your family will receive a benefit for death of any cause.
- Most providers will not provide payment if death is due to a self-inflicted cause within the first 12 months of the policy being taken out.
- Benefit may not be paid if death is caused by suicide within the first period of the policy being taken out.
How Much Funeral Insurance can I be Covered For?
The amount of cover you can take out is not unlimited and most insurers will offer from $5,000 up to around $30,000 in $1,000 increments. That benefit amount can be increased if you die from an accident as with some insurers tripling the benefit received after 12 months.
Before you decide that a benefit payout amount of $30,000 is more than your family could possibly need to spend on your final party, consider all of the costs involved in planning a funeral.
Common costs associated with a funeral service
- A casket or urn.
- Cremation or embalming.
- A burial vault or grave liner.
- A grave marker.
- Hearse and other limousines for close family.
- Costs to dig and fill the gravesite.
- The purchase of the burial plot.
Funeral protection insurance is an additional expense in your budget, but it has been designed to be affordable. The premiums payable are based on the amount of cover you choose, your age or the age of the oldest insured person on the policy, and your gender so you can tailor a package that suits you now and will protect you in the future.
How Much does Funeral Insurance Cost?
The following factors will determine your premium repayments.
- The age of the life insured.
- Whether or not the insured smokes.
- The benefit applied for, including benefit indexation.
- The gender of the insured.
- Any policy discounts that are applicable to the policy.
- Any additional features.
Is Funeral Insurance Tax Deductible in Australia?
- Generally premiums paid are not tax deductible.
- Any additional benefits are generally not assessed for income tax purposes.
- The premium rates provided are generally inclusive of all premium charges.
Conditions of Your Funeral Insurance Cover: What You Need to Know
Funeral protection insurance is not a product you are ever going to use, but it is one that your family are going to rely on after you're gone. However, while you're still here you can make sure you've made the right decision in your policy choice by taking advantage of the 30 day money back guarantee. This will give you time to make sure you are happy with the policy and all of its conditions, and do any checks you want to on the insurer, as well as assess their customers service. If you choose you can cancel a policy within the 30-day period as long as there has been no claim made, and continue comparing policies which are right for you.
Some of the conditions you will want to check for in your funeral protection insurance include:
- Changes to premiums: Premiums are generally stepped and will increase over the life of the policy.
- Paying the premiums: Your premium amount will be deducted from your account on a date of your choice. You can make your premium payments fortnightly, monthly or yearly. The payment can be made directly from your bank account or your credit card account. You can apply at any time to make a change to the method of payment, but any changes to the frequency of payments will not come into effect until the next policy anniversary.
- Change of policy: During any time within your policy term you can apply in writing to decrease or increase the insurance amount, or to change from a single plan to a family plan or vice versa.
- Cancelling the policy: If you miss a premium payment and that payment remains unpaid for more than 60 days your policy can be cancelled.
- Replacement policy: If you are applying for a new funeral protection policy to replace existing coverage you need to make sure you compare all of the benefits carefully before you switch to make sure you are moving to a policy with adequate and comparable cover. Also make sure there are no waiting periods with the change, and whether waiting periods already served with an existing insurer are recognised by the new insurer.
- Nominating beneficiaries: When a claim is made it is paid to the policyholder, however if you die the payment will be made to your estate. You can also nominate beneficiaries to receive the funeral benefit payment amount upon your death by contacting your insurer in writing. When nominating beneficiaries there are some conditions to remember: there cannot be more than five nominees; nominees must be a natural person not a company or trust; you can change the nominees at any time by applying in writing and the benefit payment will be made to the most recent nominee form provided; if the nominee is a minor when the benefit needs to be paid, the amount will be paid to the nominee's legal guardian; if a nominee has died before you, the benefit pay out will go to your legal representative for distribution.
- Continuation of a partner's policy: If you die and you are survived by your partner who is on the same policy as you, they will continue to receive coverage under a new policy for themselves, with the same benefit amount.
- To claim a benefit: When you die your legal representative will have to notify your insurer and provide a completed form from your doctor or specialist – this is to be completed at the expense of your estate. The claim should be made as soon as possible after death and proof of death must be supported by at least one medical practitioner, plus any laboratory reports or tests. If a claim is made more than 120 days after death, the benefit may not be paid.
- Tax implications: In most cases the premiums for your funeral protection insurance won't be tax deductible, however, any benefit paid from the policy won't be taxed either.
Most policies will not allow the policyholder to claim back the money paid in premium payments if they decide to cancel the policy. If the policy is cancelled, they will not receive any payment and cover will cease to continue.
When does My Funeral Cover End?
- When the funeral benefit is paid
- In the event that there is no payment of premium within a specified period of its due date
- If written notification cancelling the policy has been received by the provider
- Upon your death where the benefit is not payable
How to Make a Funeral Insurance Claim
Checklist for paperwork required for funeral cover claim
- Death certificate
- Original policy document and policy schedule from when cover was first taken out.
- Completed claim form.
Claims should be made as soon as possible after the insured has passed away. Insurance companies may refuse to pay the sum insured if there is insufficient evidence of the insured's death.
Follow These Steps to Ensure Success in Your Funeral Insurance Claim
What are the Requirements to Apply for Funeral Insurance in Australia?
You can apply for funeral insurance if you are an Australian resident between 17 and 80 years of age. Most policies generally offer guaranteed acceptance, so you will be automatically accepted when you apply for cover.
Can I Apply for Joint Funeral Insurance?In most cases, policyholders can take out coverage to include their spouse/partner. They can also cover their relatives.
How to Apply for Funeral Protection
If you are an Australian resident and you are between 17 and 80 years old your acceptance into a policy is guaranteed with most insurers. You can often even apply for cover over the phone or Internet without answering any medical questions, and you will be covered right away. You can also apply for cover for your financially dependent children, who must be under 21 years old, and be Australian residents.
You may have thought about your funeral or you may not have, but even if you've only thought about your death to the extent of wanting your friends and family to celebrate your life, rather than mourn your death, make sure that the celebration can be organised as easily as possible and that remembering you isn't a financial burden for your loved ones.
What Alternatives are there to Funeral Insurance?
Funeral Insurance is certainly not the right option for everyone. It is critical for anyone considering this option to have a clear understanding of what they will pay in premiums over the course of their policy and to ensure that this does not exceed what the overall cost of their funeral. Some alternatives to funeral insurance include;
- Setting up a savings account: It might be a better option to set up a dedicated high-interest savings account to hold funds for your funeral. A low fee, high interest account could be a secure option to lock away a pre-determined amount and let it accumulate interest.
- Superannuation Funds: You may have enough funds accumulated in your superannuation to cover the costs of your funeral.
Funeral Protection Insurance: Frequently Asked Questions
If you still need a bit more information to help you understand and compare funeral protection, your questions are answered here:
Why do you need funeral protection?
- Having funeral cover means that you don't have to burden your family with the costs and the worry of your funeral when you die.
How does funeral protection work?
- As an applicant you can choose the cover amount you want, and a lump sum benefit amount is paid to the beneficiaries of the policy when you die, to cover your final expenses.
How much funeral protection is enough?
- The average cost of a funeral can be between $3,000 and $15,000 and your benefit will need to pay for the funeral director, casket, transport, burial plot, flowers and any other extras.
When is funeral protection active?
- The coverage from your policy is active from the time your application is approved by the insurer. In most cases you will only be covered for accidental death in the first 12 months.
Is funeral protection valid outside of Australia?
- In most cases funeral insurance will still pay a benefit amount to pay for your funeral expenses if you die while travelling overseas. However, keep in mind that this generally won't include expenses for transporting your body home.
How are funeral protection premiums calculated?
- The insurer will assess your risk factors before approving your insurance and calculating your premiums, and the biggest factor affecting your premiums is one you can't change – your age – so it can be beneficial to take out cover sooner rather than later.
What do you get back if you cancel funeral protection?
- Most insurers will have a cooling off period during which you can cancel your policy without incurring any costs. If you cancel your policy after the cooling off period you will only be refunded the unused portion of your premiums, for example if you pay your premiums yearly and cancel in the middle of the year.
Can you insure your whole family?
- Most insurers will allow you to take out a joint policy for your partner. A separate policy can be taken out for dependent children under the age of 21.
Are there any exclusions with funeral protection?
- Exclusions will vary between policies and insurers, and a common exclusion is that you will only be covered for accidental death in the first 12 months, and covered for any cause of death after 12 months.
Is the funeral protection benefit amount taxed?
- No, the benefit amount paid out upon your death is generally tax free, although you may benefit from seeking tax advice on your personal circumstances from your own adviser.
How can the level of funeral protection be increased?
- You can apply to increase your coverage amount at any time, as long as the benefit amount you choose is within the range offered by the insurer.
Funerals are held as a way to celebrate life and remember a loved one who has passed away, while providing a point of closure for family and friends. Therefore, when you die, you want to make sure you are remembered the way you were, and your family and friends are allowed to grieve you, instead of being grieved by the stress and financial pressure of having to pay for your funeral. No matter how big or small your funeral is, there are always final expenses to be paid, and funeral protection insurance allows you to give your loved ones one more helping hand.Receive a preliminary quote for Funeral Insurance