Should Pensioners Consider Funeral Insurance?
Funeral insurance provides a lump sum payment to cover the cost of ones funeral and any other minor final expenses that may need to be covered following ones death. Policy owners can cover final expenses at a stage in their life where they have reduced financial obligations making funeral insurance worth considering for pensioners. Funeral Insurance will usually let people make ongoing contributions for their cover until the age of 90. After this period, the cover will remain in place for free. In comparison to other types of life insurance, the application process for funeral insurance is generally much more straightforward with reduced medical or occupation underwriting usually required. However, it is critical that people taking out cover ensure they do not end up paying more in premiums then they would actually spend on a funeral.
This article will outline the key benefits of funeral insurance for pensioners and what to look out for when taking out cover.
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Funeral Insurance cover can provide pensioners with affordable cover for the essentials
Funeral cover can be a good option for pensioners because it is an affordable type of insurance that provides a reduced benefit for the essentials.
Less financial obligations
Less financial obligations
Pensioners will usually not have the same financial obligations as other age-brackets. It is likely their children will be financially independent of them, they will have paid off their mortgage and have little outstanding debt. This means that many are just looking to tie up the costs that will be incurred from their funeral.
Cover for what is really needed
Cover for what is really needed
Funeral insurance provides cover for the final expenses and cuts out all the bells and whistles of more comprehensive plans with higher premiums.
It isn’t always easy for people over the age of 60 and even 50 to take out life insurance. Pre-existing medical conditions can hold back many people back from getting cover in place and if they do get cover they will often have a premium loading applied to account for the additional risk. This means that life insurance for people in this age group is often quite costly. Funeral cover can provide an affordable means of getting some insurance in place so that your family is not left with a hefty funeral bill and can say goodbye without taking on any financial pressure.
How might a pensioner benefit from Funeral Insurance?
Funeral insurance provides an affordable means of insurance cover that is easy to apply for and easy to manage. Policy owners are given a lump-sum payment that can be used to cover the cost of a funeral and other associated expenses that may arise following death. Lets take a look at some of the key advantages:
- No medical underwriting: Most insurers will not require the applicant to submit medical underwriting in order to be able to take out cover.
- Later entry age: Life Insurance will usually have a maximum entry age of 75 years old. Most funeral policies will have a maximum entry age of 80 years.
- Premium free introductory period: Some insurers will provide cover for the first three months free of charge.
- Range of cover options: Applicants can generally take out between $5,000 and $30,000 in cover in intervals of $1,000.
- Fast application process: The reduced underwriting required for funeral insurance means that cover can be put in place quickly.
- Flexible repayment frequency: Applicants can usually make either weekly, monthly or annual premium payments.
- Increase cover: Policy owners can increase cover each year to ensure they have enough cover in place or to keep up with inflation.
- Accidental death payment: Most insurers will pay up to 3 times the benefit amount if death is from accident after 12 months of having taken out cover. Accidental death is still covered within the first 12 months of the policy but will only provide the regular sum-insured.
Traps of Funeral Insurance for pensioners to watch out for
One of the major pitfalls of funeral insurance that applicants must be aware of is the potential for the premium payments to surpass the actual cost of a funeral if the policy is in place for too long and the premiums increase year on year. There have been reported cases of elderly Australians paying enough in premiums for up to two funerals and being forced to cancel the cover to avoid draining their funds on expensive cover. As with life insurance, cancelling your cover will not result in any refund of premium payments that have been made.
How to avoid paying too much for cover
Some funeral insurance policies will now cease premium payments once the premiums paid are equal to the desired sum-insured. Once the sum-insured has been reached, cover will remain in place until a claim has been made. This new feature gives customers the peace of mind that they will not be forced to pay excess in premiums over the life of the policy and still receive the desired sum-insured. Zurich EziCover Funeral Advantage is one of the policies available on the Australian market currently offering this feature.
Key questions for Pensioners to ask when looking for Funeral Cover
It is critical for any pensioner looking to take out cover to be absolutely clear on the terms and conditions of their policy. Asking your insurance consultant the following questions can help ensure you have the right level of protection in place.
- What is the maximum entry age to take out a policy?
- What is the maximum sum-insured?
- Will my premiums be capped after when they reach my sum-insured or is cover provided for free when I reach a certain age?
- Is medical underwriting required?
- Are premiums for accidental death refundable in the first 12 months?
- Will accidental death give an increased benefit payment after 12 months?
- Am I able to increase my cover?
- What premium payment frequency can I choose?
- How long is the waiting period? (period of time between a claim being submitted and a benefit being paid)
- Am I covered overseas?
- Does the benefit payment have to be used for funeral costs or can it cover other expenses?
- How will the premiums increase with age?
- Does the policy offer a cooling-off period that I can back out of the policy?
Conclusion: Always read the fine print when comparing funeral insurance plans for pensioners
If you are in your retirement years and looking for an affordable insurance option to tie up final expenses, it might be worth discussing what funeral insurance policies are available with a financial adviser. Make sure you are aware of some of the potential traps of taking out funeral cover before applying and make sure you know what you will be paying in premiums over the life of the policy.
Make an enquiry with an insurance consultant to uncover more of the benefits of this type of cover and review different policy options. A consultant will also help you determine an appropriate amount of cover for your situation based on your funeral needs and any final expenses.