Funeral insurance: Providing for your final wishes


The days and weeks following the death of a loved one can be tough. Families are tasked with making many important decisions, while trying to cope with their own grief and going about their daily lives. This can be a stressful time, and one that they cannot easily prepare for if the death is sudden.

No one knows exactly when they will pass away, but you can take steps to help your family and friends once you’re gone. One option to consider could be taking out a funeral insurance policy.


What is funeral insurance?

As the name suggests, funeral insurance is a type of insurance policy designed to help pay for the costs of a funeral.  Policies may also include optional features, such as paying the benefit if you were to suffer an accidental serious injury or providing a larger benefit amount if your death is the result of an accident.

Despite having ‘funeral’ in its name, many funeral insurance policies allow the beneficiary to spend the money received however they like. Families may decide to use the benefit to pay for the funeral service, but can use all or some of it for whatever else they choose. This might include covering other final debts left behind by the deceased, paying household bills or to provide meals or household services during what is likely to be a stressful time.

Why might I need a funeral insurance policy?

For many New Zealanders, the price of a funeral may come as a shock. The Funeral Directors Association of New Zealand put the cost of a funeral between $4,000 to $15,000 in 2017. However, this number can be much higher depending on the selections made and even where you decide to be buried. For example, the average price of a cemetery plot in Auckland was around $5,500 in 2016. Local councils set their own cemetery and burial fees, meaning costs can vary widely from suburb to suburb.

Even after factoring in the maximum $2,030 funeral grant from the Ministry of Social Development (which is means tested), many families may struggle to come up with the funds to pay for a funeral on what is often short notice. A funeral insurance policy can help your loved ones cover the costs associated with the service and burial.

A funeral insurance policy could also help you keep some control over the shape of your funeral service. With only 5% of New Zealanders planning their own funerals, decision making largely falls on family and friends when someone passes away. Loved ones may have a very different idea of what the deceased would have wanted, or may try to disregard any plans that were made before their death.

While any final decisions are ultimately up to those planning the service, providing funds through a funeral insurance policy might help guide your loved ones. Choosing a benefit amount that covers a specific type of service, coffin choice or burial plot could help put your family at ease about your decision. They may also be more likely to honour your wishes, knowing that you took the time to arrange a way to help pay for your wishes.

The benefits of funeral insurance

Funeral insurance is just one of the ways people arrange to pay for their own service. However, it does have some advantages over other methods.

As long as you name a beneficiary, your funeral insurance policy is not considered part of your estate upon death. The process of administering a will can take months or even years to complete, meaning money held in bank accounts may not be made available to your family until long after your funeral. This could leave your loved ones out of pocket, creating unneeded financial stress.

Funeral insurance is designed to be paid out quickly. Some companies are even able to pay out the benefit less than a week after receiving the necessary paperwork. In this case, the money is there for your family when it’s needed most, allowing them to plan and pay for a funeral service (or anything else they need) without exhausting their own savings.

A funeral insurance policy may also appeal to those who want to pay for their service, but don’t necessarily want to make other arrangements. Pre-paid funeral plans often require people to commit to a specific funeral director or make decisions about their burial (such as selecting a casket, burial plot or headstone) when purchasing. Since a funeral insurance benefit can be spent however your family likes, you can leave the details up to your family, but know that the financial side may be taken care of.

The importance of planning ahead

It can be difficult to think about your own death, but it could help your family avoid some emotional and financial stress when the time comes. A funeral insurance policy is just one way you can bring some peace of mind to your loved ones. If you choose this option, be sure to tell a trusted family member where they can find the policy details. That way, when the time comes, they can start planning your farewell with a little less stress.

Tags:Funeral insurance

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