“I can sum up funeral insurance in a few words,” says Kimba Griffith, founder of The Last Hurrah funerals. “Don’t do it!”
And it seems that Ms Griffith’s warning is not an isolated opinion.
The CEO of Tasmania’s No Interest Loan Scheme (NILS), John Hooper, believes the funeral industry needs reform and, according to a recent ABC News report, one consumer’s challenges showcase the issues within the sector.
The story of Tasmanian Rowena Sweeney presents a strong case that the cost of funeral insurance far outweighs the eventual benefit. Without access to any significant savings, Ms Sweeney took out a funeral insurance policy to prevent her home being sold to pay for her service. But, as the ABC report shows, she now feels trapped by the ongoing premiums and has already paid $88 a month for more than 10 years.
So far, Ms Sweeney estimates, the cover has cost her more than $10,000.
The eventual payout benefit is set at $15,000 but Ms Sweeney is locked into paying premiums for life, essentially, with her obligation to pay monthly premiums to TAL insurance only stopping when she turns 90.
But for Ms Sweeney, aged 60, 30 more years at $88 per month means paying another $31,000+, in addition to the thousands TAL has already received. And if she pulls out? She loses everything.
She admitted being lured by a television advertisement and, although the fine print did offer the protective disclaimer that consumers consult a financial adviser, Sweeney didn’t – and it’s a decision that has cost her dearly. For Ms Sweeney’s daughter, who is only in her early 30s and also signed up at the same time, securing her $15,000 payout is also dependent on what is essentially a lifetime of monthly premiums until the age of 90.
Although no spokesperson for insurance company TAL would comment to the ABC News on individual customers, it did deliver a marketing spiel that “funeral insurance was valued by customers who could not pay up-front for a prepaid funeral”.
“We take great care to ensure our customers understand that products they are purchasing from us are insurance products and not funeral savings products, which are different,” the spokesperson told the ABC.
From the perspective of John Hooper from NILS, though, “it’s just not fair”.
“If they pull out of their funeral arrangement because they think it is a rip off and then they do pass away a fortnight later, even though they might have spent $10,000 or $20,000 [in payments] … they’re not covered. That’s just not right,” he told the ABC.
“It’s an absolute rort,” says Ms Griffith at The Last Hurrah. “You may pay many times what you’d pay for a funeral if you live a long life, and, once you start it, you can never stop. or you lose the entire amount.”
A better and more affordable alternative, she says, is to get a funeral bond “that you can control”.
“You can pay into it over time and then assign it to a funeral director,” she says.
Are you caught in a funeral insurance plan you can’t get out of? Have you prepaid your funeral? Have you had to fund the funeral costs of a loved one who had not prepared financially? Share your stories in the comments section below.