Comparing
Pre-paid Funeral Funds
with
"Funeral Insurance - As Seen On TV"

The last thing we want to see is people ending up in financial hardship in their attempts to pay for their funeral. There are big differences, and it is important that you understand these differences so you can decide which one suits your needs. We encourage people to ensure they’re making informed decisions on how to pre-finance their funeral by exploring all their options. Do your research and don't take just one person’s word for it. You may find that a pre-paid funeral fund makes more financial sense. Before making a decision, we recommend speaking to your local AFDA member funeral director; Luke Apthorpe & Family Funeral Directors.

Example of a Funeral Fund

A funeral fund is where you consult with a funeral director and pay for services you have chosen.
Once the agreed amount has been paid for there are no further payments required.
Regardless of your age, if your funeral quotation is $6000 and you pay $6000, that is all you need to pay*
*except where further services or upgrades not detailed in the original contract are requested by the client or family at the time of the funeral, in which case an additional invoice would be issued at the time of the funeral. If there are no changes or additional requests there would be no more to pay.

Example of Funeral Insurance

Based on research by the Combined Pensioners and Superannuants Association (CPSA) of NSW.
Research found that it would take only 15 years before someone aged 60 taking out $6000 in cover had paid more in insurance premiums than the cost of the funeral. It found that by age 90, people with cover for a $19,000 funeral would have paid between $64,000 and $84,000 in premiums. CPSA policy/research officer Antoine
Mangion said daytime TV was overrun with funeral insurance advertisements claiming to provide “peace of mind for the price of a cup of coffee per week” but that peace of mind could end up costing $140,000. The
premiums may start off cheap but don't take long to blow out. In the end most people will pay many times more in premiums than the cost of the funeral. And to make things worse, if you cant pay because the premiums become too expensive, your cover is cancelled and you lose all the money you’ve put in for premiums. If you choose to cancel your insurance you do not get back any of what you have paid. The CPSA has warned people not to get caught up in the funeral insurance trap. It is important to consider everything before you commit.

The last thing we want to see is people ending up in financial hardship in their attempts to pay for their funeral. There are big differences, and it is important that you understand these differences so you can decide which one suits your needs. We encourage people to ensure they’re making informed decisions on how to pre-finance their funeral by exploring all their options. Do your research and don't take just one person’s word for it. You may find that a pre-paid funeral fund makes more financial sense. Before making a decision, we recommend
speaking to your local AFDA member funeral director; Luke Apthorpe & Family Funeral Directors.

If you pay Insurance Premiums from Age 50

Premiums paid from age 50: (see graph below)
Premiums will cost $109,932 to $142,405 by age 90.
The benefit will be $31,520 to $40,299 at age 90 on;
A funeral will likely cost $26,162 after 3.75% p.a. cost increases;
$6000 will be worth $18,108 by this time after inflation of 2.8%;
Premiums will cost more than the benefit by age 71.



If you pay Insurance Premiums from Age 70

Premiums paid from age 70:
Premiums will cost $35,601 to $48,471 by age 90;
The benefit will be $11,880 to $15162 at age 90 on;
A funeral will likely cost $12,529 after 3.75% p.a. cost increases;
$6000 will be worth $10,424 by this time after inflation of 2.8%
Premiums will cost more than the benefit by age 78.

 



Excerpts from full article “Funeral Insurance; Peace of Mind? You’re in for a big surprise” -
“The Voice of Pensioners and Superannuants of NSW - APRIL 2011” www.cpsa.org.au

 

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