Do I need to take out a Funeral Insurance
Typical plan features
Funeral plans come in three forms: 1) Individual cover, 2) Family cover, and 3) Cover for Parents where age is a vital factor to the product.
Typical cover can range from as little as R5,000 to R50,000. Funeral Plans pay out a tax-free cash lump sum for funeral expenses, so it is also called burial insurance.
The premiums to be paid are directly dependent on the level of cover and age of the insured. For R5,000 cover one can expect to pay around R12 a month at the low end of the spectrum, and for R50,000 cover expect to pay over R100 a month − all entirely age dependant. The older one is the higher the premium.
Purpose of Funeral Plans
A funeral plan is designed to ease the financial burden during a difficult time by contributing towards the cost of a funeral on the death of the insured person/s by providing the nominated beneficiary with a lump sum payment;
Also, many of the products on the market cover more than just funeral expenses. There are smaller benefits that come with the product. These benefits vary from one company's product to another.
A funeral plan pays out a lump sum on the death of the insured or extended family covered by the policy. The money can then be used at the beneficiary's discretion for funeral arrangements etc.
Why take out a funeral plan
We work and save during our lives, to protect and grow our investments for rainy days, educating our children and maintaining our home. But death is also a real expense. Funeral cover emerged to protect and save people from the high cost of a funeral.
Ideally one does not want to use money from savings that are meant for the above plethora of life's needs. That is why funeral cover is so important − especially for low to middle income South Africans. It keeps us on the path to financial security by specifically easing the burden of funeral costs.
Key considerations
Your assets available will determine whether a funeral plan is important for you or not. Ask yourself if you can afford to pay for a funeral and all the arrangements that go with it − and if the money is readily available on short notice.
If not then a funeral plan will dramatically increase your peace of mind and capacity to deal with a very traumatic experience in a person's lifetime.
It is thus very important to ask these questions today, to best prepare you for the future.
Funeral cover is reasonably clear and simple to understand. The companies that offer this type of cover generally have two or more options for you to consider. They will typically vary the level of cover and thus adjust the premium accordingly. The choice you make is as to your preference. Think carefully and do your research before accepting the policy.
The following Funeral Plan criteria are very important to look out for:
Timely pay-outs
According to the Association for Savings and Investment SA (ASISA)
, one of the key features of funeral insurance is that the benefit is paid out very quickly, often within 24 to 48 hours.This is necessary because the benefit is designed to cover the cost of the funeral. Therefore very little claims information is required, often only a death certificate.
Cover, Term, and Premiums
Cover amounts must be stipulated clearly and what the cost to you is, in the form of monthly premium.
The product is usually sold for a fixed term, for example 10 years, or for the life-time of the insured and premiums are paid for the benefit term.
Premiums are usually not guaranteed and may be increased should the insurer feel that the premiums are insufficient to cover the claims and expenses.
Standard funeral products require you to pay monthly premiums, whilst Prepaid Funeral Cover products accept once off premiums − where you pay one upfront premium for let's say, 6 to 12 months cover. You are then obliged to pay a top-up premium after that term to keep your cover continuous.
Waiting Periods
Due to the fact that very little or no underwriting is done on funeral benefits, it is usual to have a waiting period during which no (or a reduced) benefit will be paid. The waiting period will typically be six months but can vary substantially from one product to the next, warns ASISA.
Plan options
Cover types, can be in the form of individual cover for yourself, for your immediate family or your parents and/or parents in-laws.
Additional benefits
Funeral benefits also known as 'assistance benefits', come with added words such as death and disability benefits - which are very confusing! Often leaving you wondering what the conditions attached to such benefits are, and how much extra is it costing you.
Ask yourself will you get enough paid out to you to cover the funeral with some leeway for unforeseen expenses − that will be a good guide.
Product enticements
Product enticements such as 'cash back bonuses' or assistance with legal expenses, are good when comparing value across a range of products, but first make sure you are happy with the other points mentioned above as these are much more important considerations to your funeral cover of choice.
These are also called 'Value Added Benefits'.
Exclusions
Exclusions are conditions upon which you are not covered. These imposed conditions vary from company to company. Common exclusions would include a two-year suicide exclusion, any pre-existing conditions, self-inflicted injuries, substance abuse, war and riot, amongst others.
Claims Process
Get an idea of the company's claims process policy. It is common practice for certain forms to be filled out before claims can be assessed. It is important to submit all required claims documents as soon as possible so that you don't hold up the process from your side. Time is critical during this difficult time.
Cooling off period
A mandatory 30 day cooling off period should also be afforded to you on the funeral policy. This entitles you to cancel the policy if you are not happy with it for any reason, within 30 days of taking it up.
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