What is Funeral Insurance?

Find out all about funeral insurance and what options you have to cover the cost of your funeral here with Savvy.

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, updated on September 18th, 2023       

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What is funeral insurance

Funeral planning is not an easy subject for most people to talk about, which is why you may be wondering ‘what is funeral insurance?’ You can find out all you need to know about funeral insurance right here with Savvy’s handy guide. This will help you know what to look out for when comparing policies, and to make a decision about whether funeral insurance is the right choice for you. 

Here at Savvy we don’t offer direct comparisons between different funeral insurance policies, but we do offer free comparisons between life insurance policies which include cover for the cost of a funeral. Find out all you need to know about funeral financing right here!

What is funeral insurance?

Funeral insurance is a type of financial protection designed to cover the expenses associated with a person's funeral upon their passing. With funeral insurance, policyholders pay regular premiums, typically on a monthly or fortnightly basis, in exchange for a predetermined lump-sum payment to their beneficiaries upon their death. This payment is intended to help with the cost of a funeral, such as death notifications, burial or cremation, a coffin or casket, flowers, and other associated expenses. 

Cover ranges from a minimum of $3,000 up to $15,000 or more. Some insurance companies allow you to extend the cover up to $25,000, but the most usual cover limit is $15,000. This sum is paid to a nominated beneficiary to help pay for funeral costs.  

Many funeral policies also include additional benefits such as: 

  • Terminal illness cover – which means the agreed benefit amount is paid out if you receive a terminal illness diagnosis before you pass away
  • Accidental death cover – which pays out double or triple the original insured amount if your death is caused by an accident
  • Accidental serious injury – some policies will also pay a benefit if you receive a life-changing accidental serious injury (for example, losing the use of a limb or being confined to a wheelchair for life)
  • Family funeral insurance – cover for all members of a family rather than one specific person
  • Early payout options – allowing you to cancel your cover at a certain age (often over 80 or 85) and receive a cash payout

What features of funeral insurance should I compare?

If you are considering buying a stand-alone funeral insurance policy, rather than a form of life insurance that includes funeral cover, here are some of the features you should compare:  

Benefit amount:  

This is the lump-sum payment your policy provides to beneficiaries upon your passing. Compare coverage amounts, typically ranging from $3,000 to $15,000, with some insurers offering higher options. 

Guaranteed acceptance:  

Look for policies with no medical exams required, ensuring automatic acceptance if you meet age eligibility criteria (usually between 40 and 80 years old). 

Special discounts and offers:  

Explore sign-up deals, loyalty discounts, and early cash-out options from different insurance providers.  

Policy expiry age:  

Compare if the policy lasts for your lifetime, or has an expiry age, which may apply when you are over 80 years old. Some providers ensure coverage until the policyholder's 100th birthday. 

Premium choice:  

Decide between stepped premiums (increasing over time) or level premiums (fixed amount). Tailor your choice based on short- and long-term affordability. 

Payout time:  

Look for providers with quick payout times, often within one day after receiving the necessary claim details. Some insurers advertise payouts within 24 hours so that funeral arrangements are not delayed. 

What are the alternatives to stand-alone funeral insurance?

When considering the alternatives to purchasing standalone funeral insurance, you have various options which can help to pay for your funeral. These include: 

  • A life insurance policy with funeral cover: Opt for a life insurance policy that offers funeral coverage within its benefits. This way, you can obtain broader financial protection beyond just assistance with funeral costs. 
  • A pre-paid funeral plan: Consider a pre-paid funeral plan offered by a specific funeral director. These plans allow you to arrange and pay for your funeral in advance, ensuring your preferences are known and recorded while you are still alive, and potentially saving on future price increases. 
  • Funeral bonds: These are a managed investment product that are designed to help you save regularly towards the cost of your funeral. They involve investing money into an independently managed funeral fund, which will pay out the bond value when you pass away. Contributions to a funeral bond can be made either through a lump sum payment, or regular monthly instalments until your desired bond value is reached. 
  • Utilising your existing savings: Some people maintain a dedicated savings account just to pay for their funeral expenses. They contribute to it regularly throughout their lifetime, rather than paying for funeral insurance. For example, paying just $20 a month for 20 years into a savings account (even without any interest being paid) would result in a nest-egg of $4,800. 
  • Superannuation funds: Your superannuation can also be a source of funding for your funeral expenses. However, be aware that your family might need to cover upfront funeral costs before accessing your superannuation funds, as super funds don’t generally release funds quickly in time to pay for a funeral. 

Exploring these alternatives ensures that you have a range of options to choose from. Each option has its pros and cons, so you should consider them based on your unique financial position and needs. 

Frequently asked questions about funeral insurance

How much does the average funeral cost in Australia?

The most recent survey by Australian Seniors found the average cost of a burial service was just over $9,000, while the average cost of cremation was $6,334. However, a basic cremation can cost a minimum of $3,000 while a basic burial service will start from $6,000.  

How much does funeral insurance cost?

Naturally, the cost of your funeral insurance will depend on the benefit sum you choose, ranging from a minimum of $3,000 up to $15,000 or more. Premiums to pay for this type of cover can cost just $3 a week.   

How does a stepped premium funeral insurance policy work?

A stepped premium funeral insurance policy begins with lower insurance payments when you first get the policy. As you get older, the payments slowly go up. This is because the chances of needing insurance also increase as you age. These types of policies may be a good choice for young people because they start with very low premiums. However, as you grow older, they become more expensive. Before picking this type of policy, make sure the rising costs fit in with your long-term budget and financial plans. 

Are there any waiting periods before a funeral insurance policy pays out the insured sum?

Yes. During the first 12 months of paying for your funeral insurance policy, the full benefit amount will only be paid out in the event of accidental death. However, after the 12-month waiting period is over, the policy will pay regardless of the cause of death (sometimes excluding suicide, depending on which funeral insurance company you choose). 

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Although we don't compare specialised funeral insurance policies at Savvy, we can help you consider a range of life insurance options which includes funeral coverage. Get started with us today!

Disclaimer:

Savvy is partnered with Compare Club Australia Pty Ltd (AFS representative number 001279036) of Alternative Media Pty Ltd (AFS License number 486326) to provide readers with a variety of life insurance policies to compare. Savvy earns a commission from Compare Club each time a customer buys a life insurance policy via our website. We don’t arrange for products to be purchased from these brands directly, as all purchases are conducted via Compare Club.

Savvy does not compare all life insurance policies or providers currently operating in the market. Any advice presented above or on other pages is general in nature and doesn’t consider your personal or business objectives, needs or finances. It’s always important to consider whether advice is suitable for you before purchasing an insurance policy.

For any further information on the variety of insurers compared by Compare Club or how their business works, you can read their Financial Services Guide.