Losing a loved one is one of the hardest things to go through in life, and the devastation of the loss is compounded by the cost and strain of organising a funeral. “Many people forget that once the funeral is over and family members return home, the dependents of the deceased need to continue living- and often have to do so without the income and financial support that was there before,” says Elad Smadja, Head of Bancassurance: Product Development at Liberty.
In some cases, dependents inherit their loved one’s debt, because they did not have an insurance plan in place to pay-off their debt. Therefore, it is important to understand the difference between funeral cover and life cover, and to make sure that you have adequate cover for both.
Elad Smadja helps us understand the difference between life cover and funeral cover
Funeral cover
- Funeral cover is insurance which provides funds for the short-term. Most policies pay out a lump sum at the time of the claim and provide for things like groceries for family members during the funeral preparations, airtime to communicate with family members, the tent, tables and chairs for the event, catering, the casket and tombstone, flowers, and transportation for important family members from the ceremony to the grave yard.
- Funeral cover is an important investment to make so that your family is able to give you the dignified funeral that you deserve. However, it is also important to think about what will happen to your loved ones after you are gone.
Life cover
- Life cover is different in that it provides funds which consider the long-term consequences of death – life after death. The value of life cover is usually three times your annual salary and, in most cases, is paid out as a once-off lump sum.
- The purpose of life cover is to ensure that there is enough money to firstly, settle all outstanding debts upon your death, and secondly, to continue providing for your dependents who are left behind.
- It is very important for the main beneficiary of the life cover policy not to spend the money all at once. Rather, they should re-invest the money into an endowment or education policy (if there are children involved) so that the money can grow over time and provide for their dependents for as long as possible.
Smart cover
- Remember that funeral plan providers often limit the amount of cover they will pay, so be cautious and seek proper advice when taking out multiple policies with different organisations and retailers.
- Price is not the only factor to consider. You should also look at the benefits being provided. For instance, retail stores and mobile service providers also offer funeral options, but you need to look for a product which provides comprehensive cover, from a reputable provider and be consistent in paying those premiums.
“Your financial adviser will be able to guide you on the most suitable option for you, depending on your life stage, level of income, and number of dependents. It is important to review your life cover every three to five years to ensure that it remains relevant. You should also contact your financial adviser after important life changing events such as marriage or divorce, an increase or decrease in your salary, or the birth of a child,” concludes Smadja.
