If you’re thinking about buying funeral insurance, there are a few factors to consider. Most importantly, you will need to work out how much your funeral is likely to cost. Secondly, you will need to work out how long you are likely to live – a factor that is perhaps slightly more difficult to estimate.
The cost of a funeral
Before you take out funeral insurance, it’s a good idea to look into the cost of your funeral. Funerals can range in price, with the more basic funerals costing around $4000, and the more elaborate funerals costing around $14,000.
When you are costing your funeral, think about whether you want the following items, and how much you would be willing to pay for them.
- Funeral director fees
- Death certificate
- Burial or cremation
- Cemetery plot
- Other expenses (celebrant or clergy, flowers, newspaper notices, wake)
Taking out funeral insurance
When you take out funeral insurance, you will need to decide how much you want the payout to be. The payout is paid to your beneficiaries upon your death, to cover the cost of your funeral. Payouts usually range from $5000 to $15,000, but can be as much as $30,000.
Before you sign up for funeral insurance, you will need to think about how long you are likely to live. While this is certainly not easy, it’s generally not a good idea to take out funeral insurance too early.
If you take out funeral insurance too early, you may end up paying more in premiums than your beneficiaries receive in the payout. Work out how long it would take for your premiums to surpass your payout amount (usually no more than ten years), and think about whether taking out funeral insurance at the moment is worthwhile.
Funeral insurance can often feature stepped premiums, which increase as you get older. This means your premiums will keep increasing until you die – or until you can’t afford to pay them any more.
If you choose a policy with stepped premiums, make sure that you can afford to continue paying them. If you can no longer afford them, your policy may be cancelled, and you may lose everything you have paid into the policy.
If you are unsure about how your policy works, read the PDS carefully and ask your insurer any questions you may have. Before you sign up for any insurance, it’s important to know exactly where you stand.
Funeral insurance can be affordable and useful – as long as you choose the right policy, offering the right level of cover, and you don’t take it out too early. However, as no one has a crystal ball, knowing how early is too early is impossible. Compare your options with GIO funeral cover, and find the policy that will work for you.