Do You Need Funeral Cover?

A funeral is expensive. Depending on whether you cremate or bury your loved one, it could cost anywhere between R3,000 and R50,000, or more. Dealing with death is very stressful, and the last thing you want to do is worry about money.

There are many different types of funeral policies available, and some people have more than one but no other form of life cover or savings. Understand how funeral policies work so that you buy the right cover for your needs.

What’s the difference between a funeral cover and a life cover?

They are very similar; both payout on the death of the life assured. Funeral cover is limited to R100,000 and pays out within 48 hours of the death, so there’s money to pay for the funeral and other related expenses. There is limited underwriting (medical questions and tests), and premiums are often based on age. There can be more than one funeral policy for the same person’s life, and the proceeds will be paid out to the beneficiaries separately.

Life cover is intended to provide for the family’s living expenses over a longer period and can be a much greater amount. Most insurers have a limit of around R10 million in life cover, but you can have more than one policy.  There is far more medical information required when you apply for life cover, and the proceeds may take a few weeks to pay out.

What are the requirements to take out funeral cover on other people’s lives?

There has to be an insurable interest. In other words, there will be a financial impact on you if they pass away. For example, if your parent, sibling, or partner died, you would be responsible for their burial.
The insured person must know that you have taken out a funeral policy on their life, and they must agree to it unless they’re a minor child or an adult who is incapable of managing their affairs. Insuring someone without their knowledge is considered insurance fraud.

Do you need funeral cover if you have a life cover policy?

It all depends on your needs and what type of policy you have. Some life cover policies offer a funeral or final expenses benefit, in which case an amount of money is paid out within 48 hours and the rest of the proceeds are paid once the claim has been processed.

Check your policy schedule to find out if you have this benefit. You may also have enough money to pay for a funeral (such as money in a savings account), so you don’t need a funeral policy to provide cash at that time.

Will my pension fund benefits provide funeral cover?

It’s often overlooked, but some pension funds provide a funeral benefit. The Government Employee’s Pension Fund (GEPF), for example, pays R15,000 for the death of the member or their spouse and R6,000 for each eligible child. If you’re a member of another pension fund, find out if there’s a similar funeral benefit.

Can you have too much funeral cover?

Funerals are very important in our culture, so it’s easy to fall into the trap of having lots of funeral policies. They are also aggressively marketed by the product providers. You need to guard against paying hundreds of rand a month on funeral policies, but then not having an emergency fund or retirement savings.

Your financial plan needs to consider all your needs, making sure that you have money for any unexpected events today, as well as a nest egg for old age.

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This article was written by Sylvia Walker, a financial planner, speaker, and author of smartwoman. www.sylviawalker.co.za