Can you answer these 5 awkward questions about funeral cover?
Talking about the passing of a loved one can be uncomfortable, not to mention discussing your own demise. This is normal, but it can get in the way of you finding out the facts of funeral cover.
It’s so important to understand the financial products you pay towards each month. Therefore, we got in touch with specialists to outline the questions you need to ask when taking out funeral cover.
1. Could your body be stuck in the state mortuary for 12 months?
Reagan Mitchell, certified financial planner and managing director at WealthyMe, explains that some conversations about funeral cover aren’t proactive on the client’s side – so the first uncomfortable question to ask would be if they have cover at all. And if not, why not.
“There are people who don’t think funeral cover is a priority. The ugly reality is that, if your family can’t afford to bury you and they need to depend on the government, there’s a strong likelihood that your body will remain in a state mortuary for up to 12 months,” says Mitchell.
“Only thereafter does the government do mass funerals. A small monthly premium allows you to bury your loved ones with dignity,” he adds.
2. What about funeral cover for children and the elderly?
Mitchell points out that people don’t like thinking about death, especially when it comes to their children.
“Bear in mind that legislation governs or limits the pay-outs for children. So, you need to consider whether that limited pay-out will be sufficient to bury your child should such an unfortunate event occur,” says Mitchell.
Besides this, he also explains that, while specific health questions aren’t always asked, it’s important to remember that there are waiting period exclusions as well. For accidental death, pay-outs are usually immediate. But for natural causes there is a standard 6-month waiting period.
“Sometimes, with elderly folk the waiting period can be up to 24 months. Natural causes include, but are not limited to, heart attacks, illness, and stroke. Depending on your provider, suicide waiting periods range from 12 month to 24 months,” says Mitchell.
3. Have you calculated the cost of your funeral?
According to Chris Ogden, CEO of RubiBlue and founder of easiPol, if you don’t consider all the facts of your funeral policy, your family will be left with a nasty financial surprise when you pass away.
“As an affordability check, it’s good to note that there’s little point in having a policy for R250 per month and then to cancel it after a year because you can’t afford it anymore – you won’t get anything back,” says Ogden.
He recommends checking the claim turnaround time – between 24 and 48 hours is the norm – and finding out what the waiting period is before you can claim for a funeral – this is often three to six months, or a bit longer if you’re over the age of 60 to 65.
“Price a full funeral with casket, morgue fees, the fees associated with the Department of Home Affairs, burial fees, arrangements of the after-service ceremonies, and so on. Define what is important to you and ensure that your policy covers these costs,” says Ogden.
4. Should you settle your debt or take out funeral cover?
According to Andrew Codd, divisional director for Liberty Emerging Market Products, your funeral policy represents a legal contract between yourself and your insurer and, like any legal contract, you need to know what your rights are and also what’s expected of you.
He believes that while it’s excellent financial planning to purchase funeral cover, you need to know if this is the best use of your money at that point in your life.
“If you’re battling with massive debt, for example, it may be better to sort out this short-term issue first to allow you to maintain your funeral policy for the long term. So, the question is – can I meet my premium payment commitments for this policy?” says Codd.
5. How long before your family member dies?
“An awkward and harsh question to answer is how soon you expect the family member you’re covering to die,” says Codd.
He explains that funeral products have no underwriting, so they tend to be more expensive than underwritten insurance products. This means that after, for example, 15 to 20 years of payments you are likely to have paid more than the funeral benefit you’ll receive.
“So, it might be better to invest that money as long as you have the discipline to ring-fence it for the intended purpose,” says Codd.
He points out that it’s also a good idea to question why you’ve decided to cover extended family members. Are you using this as a cash-in mechanism or because you truly expect to bury your relative?
He says that this is an important distinction to make because there are other mechanisms to save money for the short term and long term.
Not all funeral cover is the same
According to Matt Kloos, co-founder and chief financial officer at CompariSure, insurance is complicated and no two products are identical. A lot can depend on the fine print and the relevant terms and conditions of the funeral cover you’re considering.
He says that knowing the features is critical: Is there a cashback option? How long does the insurer take to pay out approved claims? What is the waiting period for natural death? Does my policy lapse if I miss a premium, or will the insurer allow me to occasionally miss a premium? How easily can I make changes?
“Given how much funeral cover can vary, if you don’t know the ins and outs, you can’t be certain of what you’re buying and you could end up highly upset or underinsured down the line,” says Kloos.
“Consider two cars that are identical from the outside. Now consider the one car has a bigger engine, fancy speakers, and leather seats. If you just looked from the outside, you would think the two cars are the same, but it’s only by understanding the ins and outs that you can be 100% certain of exactly what you’re buying,” says Kloos.
As soon on Just Money