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Funeral Insurance Plans in Australia

Russell Cain Updated: 13 May 2020

Your funeral cover checklist.

Funeral cover provides a lump sum payout to your beneficiaries after a valid death certificate has been issued. This lump sum helps your loved ones pay for funeral-related expenses, like your burial or cremation and memorial service. You can generally choose the level of cover you want, starting from as low as $5,000 all the way up to $15,000.

When you’re thinking about your future it’s natural to start thinking about your death. And while you’re contemplating the legacy you’ll leave behind you should also consider the funeral insurance cover you need in order to pay for your final departure.

One way to do this is to explore the variety of funeral insurance plans available and choose the one which will best help your loved ones cope with the expenses of your passing.

How much does a funeral cost?

Generally, the average cost of a funeral in Australia can range anywhere from $3,000 to $50,000. This amount differs depending on various expenses, including:

  • Death certificate and/or certificate from the medical practitioner;
  • Transfer costs to the mortuary;
  • Funeral director’s fees;
  • Whether you choose to be buried or cremated;
  • The coffin or urn;
  • Burial notices;
  • Transport vehicles, for example, a limousine for your family;
  • Flowers and catering.

While it’s not nice to think about your death, the consequence of not doing so might leave your loved ones with the burden of having to plan and pay for your final expenses, which could leave them in debt.

Estimated funeral-related costs:

7 Ways to cover the cost of your funeral

Part of planning for your funeral is to really think about what kind of funeral you want. Once you’ve done this, you can work out how much cover you’ll need and then start to compare the different options available to pay for your funeral.

  1. Funeral insurance

    • This is a straightforward policy that pays out a lump sum upon your death, to your nominated beneficiary(s).
    • The payout will commence once the insurer has received a valid death certificate or a certificate from a medical practitioner confirming your death as well as the completed claim forms.
    • This lump sum benefit is used to cover the costs related to your funeral.
  2. Life Insurance

    • You can buy life insurance with a funeral advancement benefit.
    • This feature is generally built into your life insurance policy.
    • Pays out a specified amount upon your death to help your beneficiaries pay for funeral expenses.
  3. Funeral bonds

    • An investment bond allows you to put money away and have it invested on your behalf, with the accumulated interest being added to the value of your bond.
    • This money cannot be withdrawn early and the amount you invest might not be enough to pay for the inflationary rise of funeral costs.
    • If you pass away before paying all the instalments you’ll leave your loved ones responsible for paying the shortfall.
  4. A pre-paid funeral

    • You can pre-pay for your funeral costs by holding money in a trust established by a funeral home.
    • This is a contractual agreement between you and a funeral director, with the funeral director guaranteeing to provide you with the funeral service you planned.
    • You can either pay a lump sum or regular instalments over a set period of time.
    • If you decide to cancel your pre-paid plan, you might not get any money back. It also might not keep up with the rate of inflation, in which case your family might have to pay the shortfall.
  5. Your super fund

    • If there are any superannuation left when you die, the balance can be used to cover the cost of your funeral.
    • These funds will be either paid to your nominated dependents or your estate.
    • The benefit is usually tax-free when paid to dependents, but a ‘death tax’ will apply when paid to non-dependents, for example to your business.
    • It might take a while for the benefit to be paid out, in which case your family will have to pay your funeral costs out of their own pocket and then be reimbursed once probate is granted.
  6. Personal savings

    • You can open a savings account for the specific reason of putting money away to pay for your funeral costs, giving you more control over your money and how much you want to spend on your funeral.
    • However, you might not be able to save enough if you pass away sooner than expected or you might be tempted to use this money for other purposes, especially when falling on tough times.
    • Money in your savings is also vulnerable to the fickle nature of interest rates – so it could rise and fall unpredictably.
    • Don’t forget to leave a Will and Testament stipulating how the funds must be used.
  7. Your family

    • Without a proper life insurance or funeral plan, your family will have to shoulder the burden of paying for your funeral expenses.
    • You can help them avoid this financial and emotional stress by looking at the other six options and choosing one that fits your individual requirements and budget.

How to choose the best funeral insurance plan

There are a few steps you need to consider when it comes to arranging the details of your funeral. While some of these might not be relevant to your specific requirements, they will give you a good starting point to help you make the decision that’s right for you.

  • Calculate your final expenses: Determine what your funeral will cost. Remember to include the transport and memorial services fees.
  • Determine how fast you need the funeral payout to be: Whether you want you a lump sum to be available to your beneficiaries within 48 hours or if there’s enough in your savings to cover immediate costs while your loved ones await payout.
  • Compare funeral plans: You should compare a variety of funeral cover options to ensure you know what’s on offer, the entry and expiry age, and the level of cover available.
  • Review quotes: Gather quotes from a variety of funeral insurance plans and check whether premiums will keep up with inflation and if the policy is meant for short-term or long-term affordability.
  • Choose your funeral insurance cover: Based on the above decide which option best fits your unique requirements and will help your family best cover the cost of your final expenses.

Life insurance vs funeral insurance

Compare Policies Life Insurance Funeral Insurance
What’s covered? Both natural and accidental causes of death are covered with the usual exclusion of suicide during the first 13 months. Merely covers you for death, with only accidental death generally being covered during the first 12 months of your policy commencing.
Cover amount Generally, there is no limit to how much life cover you can take out, however, it’s best to check with your insurer. You can choose your level of cover, usually between $5,000 and $15,000, depending on the insurer.
Who is covered? Usually, the focus is predominantly on the individual, but select insurers will let you add your spouse and kids. You can choose to cover only yourself or take out couple’s cover. Some companies even offer burial insurance for the entire family.
Payouts Most insurers include a funeral advancement benefit, which pays out fairly quickly upon receipt of a valid death certificate and claim forms. The full insurance benefit will take longer but can be used for whatever your beneficiary wants; mortgage payments, daily expenses etc., not just the funeral expenses. Payouts usually occur within 3 to 7 days of a valid claim being lodged. The lump sum payout must be used for funeral-related costs.
Ease of application Acceptance is generally determined by your risk profile (age, health and smoking status) and acceptance is not guaranteed. No medicals or medical questions required and generally guaranteed acceptance is offered.
Premiums Generally, premiums are more affordable because of your risk profile being taken into consideration. However, it’s important you determine whether you have stepped or level premiums. Premiums can be more expensive than term life insurance because the cost of guaranteed acceptance is built into the price. You’ll generally have a choice between stepped vs level premiums.
Capped vs non-capped premiums Usually, life insurance does not offer capped premium options. Capped premiums are available from some insurers, ensuring you’ll never pay more in premiums than your policy is worth.

Which is best: a funeral plan or life insurance?

Whether funeral plans or life insurance is best depends on your personal circumstances. For instance, if you have health problems and been declined for life cover in the past, then a funeral insurance plan might be a better option because of guaranteed acceptance. However, if you want a policy that will protect your family should you die, then life cover might be better.

Can I get funeral cover with no waiting period?

Yes, you can get funeral cover with no waiting period because acceptance is guaranteed. However, most insurers will only pay out a claim upon receipt of a valid death certificate and if death was due to an accident during the first 12 months of your policy commencing. After that natural causes will be covered.

No one wants to think about their death, it’s an inevitable part of life. Take the first step in the planning process by comparing funeral policies from a variety of insurance companies and find the best cover at the most affordable price.

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