Planning for a funeral is something many families would rather not think about, but the financial reality of a death can place significant pressure on those left behind.
Also see: Life cover vs Funeral cover vs Retirement annuity: Which is best for your family?
Funeral insurance is designed to help families meet some of these costs by providing a benefit when an insured person dies.
In South Africa, funeral insurance is regulated as a class of life insurance business under the Insurance Act. Policies may provide a lump sum or other specified benefit intended to cover funeral-related expenses or provide a funeral service.
But taking out a policy is more than simply paying a monthly premium. Consumers need to understand exactly what they are buying, who is covered and what conditions apply before signing up.
What is funeral insurance?
Funeral insurance is generally intended to provide financial assistance after the death of an insured person.
Depending on the policy, the benefit may be paid as cash to a nominated beneficiary or may involve the provision of funeral-related services.
Policies can cover the policyholder, a spouse, children and, in some cases, extended family members. However, the people who can be covered and the maximum number of dependants vary between products.
The Financial Sector Conduct Authority (FSCA) says that funeral policies can be structured as individual or group policies, depending on the product and benefits offered.
Check the waiting period
One of the most important features to understand is the waiting period.
A waiting period means that certain benefits may not be payable immediately after a policy starts. Funeral policies commonly have waiting periods relating to death from natural causes, although the precise period depends on the policy.
The Insurance Ombudsman notes that waiting periods can vary between funeral products and has dealt with complaints where consumers were uncertain about when their cover commenced.
Consumers should therefore ask:
- How long is the waiting period?
- Does it apply to natural death, accidental death or both?
- When exactly does the waiting period start?
- What happens if the insured person dies during the waiting period?
Do not rely solely on a salesperson’s verbal explanation. Always check the policy documents.
Also see: Phuti Khomo’s Funeral Outfit Sparks Mixed Reactions Online
Understand exclusions and conditions
Every policy has terms and conditions that determine when a claim will be paid.
Before purchasing funeral cover, look carefully at exclusions, waiting periods, qualifying requirements and circumstances that could result in a claim being declined.
Make sure information supplied during the application is accurate. Giving incorrect information about an insured person’s circumstances can create problems when a claim is submitted.
It is also important to keep the policy documents in a safe place and ensure that family members or beneficiaries know that the policy exists.
Compare the premium with the benefit
A cheap monthly premium does not necessarily mean that a policy offers the best value.
When comparing policies, consider the total monthly cost against:
- The amount or value of the funeral benefit.
- The number of people covered.
- Waiting periods.
- Exclusions and other restrictions.
- Whether premiums can change.
- Whether the policy provides cash or funeral services.
- What happens if premiums are missed.
- What happens when the policyholder or another insured person dies.
You also need to determine whether they already have funeral benefits through an employer, pension fund, group scheme or another insurance policy.
The Financial Sector Conduct Authority also says you need to check authorised financial service providers.
Funeral insurance can provide valuable financial protection for families, but the policy is only useful if consumers understand its conditions before they need to make a claim.
The key is to read before you sign, ask questions, keep premiums up to date and make sure the provider is authorised.
Also see: Gayton McKenzie Defends Actions Amid Backlash Over Nandi Nyembe’s Funeral
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