What is a Funeral Policy?
A funeral policy, also known as funeral cover, is a form of life insurance and covers the expenses of a funeral. There are different ways in which the benefit payout can be used but most typically it covers the expenses or services required for a funeral.
A funeral policy should be the consideration of almost all South Africans who don't own any other life insurance products. This ensures peace of mind in the time of mourning instead of financial stress adding to this already troubling time.
Do you really need a Funeral Policy?
The short answer yes and the more important question in South Africa is whether you really need more than one!
There has been a trend for years where people have taken out multiple funeral policies for members of their families. Some studies concluded that most South Africans who have a form of funeral cover, have more than one for multiple family members. This can quickly rack up the cost of your monthly budget. The better option is to consolidate these payments into one funeral policy that meets the requirements of a family or even extended family.
Any person who has no other form of life insurance products or savings and has taken on financial and life responsibility should strongly consider getting funeral cover. If you haven't had the great misfortune of organising a funeral, you might be unfamiliar with the amount of work and cost that goes into funeral arrangements.
Typically the things to consider are:
- contacting a funeral home
- picking a coffin or,
- decide on cremation versus burial ceremony
- organise catering
- funeral programme for family and friends
- organising all the communication and events for family and friends
This entire process comes at a cost of time and money, no matter the size of the funeral and it's therefore important for any person as mentioned above to have a funeral policy.
When to get funeral cover
If it's just you, yourself and I, it can be easy to live in ignorance of this insurance product. But once you find yourself in a position where family, friends and other people are dependent on you, it's a good time to get funeral cover. This is especially true if you have don't have enough savings to cover these types of emergency costs.
How much funeral cover do you typically need?
Before deciding on a funeral policy, it's important to determine your needs. The best funeral cover for you is not a specific "Brand", but the one that best meets your needs through its combination of benefits and financial cover.
First, ask yourself this question:
Do you need the funeral policy for yourself, do you need it for yourself and your closest family or your extended family as well? These can include parents (as well as in-laws), cousins, aunts, uncles etc. It's not uncommon in South Africa for one person to carry the weight of all of these members and this is why we suggest any person gets the right funeral policy to cover all these needs instead of multiple products that rack up the costs.
Secondly, ask yourself this:
Can you afford the monthly premium required for the amount of funeral cover you want?
If yes, that's great! If not, consider starting with a more basic funeral policy and adding benefits (which can include family members) as you go along. You can even allocate a small portion of savings to this future emergency need and let the funeral cover cater for the rest.
Thirdly, ask yourself what benefits you would like your funeral policy to include.
Each funeral cover provider has unique benefits in their products and this will most probably only come into play in the final step: compare, compare, compare! At Fincheck, we're serious about comparing your options so you can make better financial decisions. So, when you have most of your needs listed, compare the benefits of your funeral cover options against each other and don't compromise on your basic needs!
Should you get a Funeral Policy instead of Life Insurance?
This question compares apples to pears and reminds us that we rather need to look at needs. Just like you can have a taste for an apple rather than a pear, so your needs might be more suited to one of the two products.
Life Insurance is typically designed to help a family survive when one or more of the key breadwinners pass away. Paying for a funeral in, this case, might not be the best allocation of money for a family needing to survive. But many people rather opt for this potential situation because they feel it is unnecessary to carry the cost of years of funeral cover payments when a small percentage of the Life Insurance payout (or other savings) can cover the cost of a funeral.
The idea is that Life Insurance helps the family maintain the same lifestyle and pay all outstanding debts of the person who passed away. So, ultimately, it will be the decision of the family whether they want to use some of this payout for the funeral, or whether they want to also have funeral cover.