A concerted advertising campaign by many funeral insurers over the last few years has convinced many consumers that they should prepare for the costs of their own funeral.
While there is an attraction to removing the burden of dumping extra costs on your grieving family, you should be clever about the method you choose to achieve this goal.
The Financial Rights Legal Centre (FRLC) explains that there are much better alternatives for paying for your own funeral before choosing the expensive option of funeral insurance.
Prepaid funerals, funeral bonds and life insurance are much more cost-effective options for covering funeral costs.
According to the FRLC, the biggest downside to funeral insurance is that if you miss too many payments you may lose all of the money that you have invested.
Also, not only will you need to keep making payments over the years, but premiums usually increase with age and grow over time.
Under some funeral insurance plans, you can end up paying more money in premiums than the cost of an average funeral.
An Invocare-funded study undertaken by actuaries Rice Warner found that a consumer who signed up for funeral insurance at age 60, and who then lived to 89, would pay about $85,000 in premiums for a $6000 funeral!
Prepaid funerals offer a better choice as all parts of your funeral are covered at today’s prices and they can be funded in ways that best suit your budget.
Another alternative to funeral insurance is your superannuation. If you have super, when you die, your super fund will pay out your balance along with any life insurance included in your policy to your beneficiaries. These funds can be used to pay back your family for the costs of your funeral.
If you are wedded to the idea of insurance, life insurance is a much better fit for purpose alternative, although you can also just look at the option of opening a special savings account and alert your relatives to the fact that these savings are to cover the costs of your funeral.
Have you ever investigated pre-paying for your funeral costs? Which option did you choose? Why?