Nearly 55% of policy cancellations for funeral insurance occur within the first year of holding the policy, according to a report published by ASIC in October 2015. That means nearly a whole year’s worth of monthly premiums down the drain, which is not what we want at all.
To avoid wasting money on a policy that we’re only going to cancel later, we must first understand whether or not we are really suited for funeral insurance before we consider taking out a policy.
Who is suited to funeral insurance?
Essentially, our research shows that funeral insurance is best suited for people over a certain age who are no longer eligible for life insurance. In short, there are three groups of people who might consider funeral insurance as a beneficial option: the unemployed, retirees over 50 who do not have life insurance, or people with pre-existing conditions that mean they cannot get life insurance. We discuss these three scenarios in more detail below.
Not everybody needs funeral insurance, because some have a funeral benefit in their life insurance, their life insurance through super, Department of Veterans’ Affairs (DVA), early release of super on compassionate grounds, or even their Centrelink benefits.
Canstar considers that there is little need for funeral insurance for anyone under the age of 50, because most people under 50 years old will have life insurance. Whether you own a policy personally or through your super fund, life insurance will cover a Death Benefit that provides your family with a lump sum to cover funeral expenses and other expenses when you die.
Funeral insurance could be useful to a person who is unemployed or has circumstances that prevent them from finding employment and who does not have life insurance held elsewhere.
2. Retirees without life insurance
Also, anyone over 50 years old who has stopped working and no longer has any life insurance may find it helpful to have funeral insurance for the same reasons.
3. Those with pre-existing conditions
The third group of people who could consider funeral insurance is anyone who cannot get life insurance for medical reasons. Funeral insurance is offered to anyone with a waiting period of 12 months for death caused by illness.
You can also get funeral insurance policies with more than one insurer if different insurers offer different excluded conditions.
Do I need funeral insurance?
If you’re not sure whether funeral insurance is right for you, ask yourself whether you fall into any of these categories – unemployed, retired with no life insurance, or no life insurance due to pre-existing health conditions.
If you don’t fit into any of these exceptions to the rule but you’re still considering taking out a policy, we recommend you get financial advice on the matter before diving in. Better safe than sorry when it comes to funeral insurance premiums.
If you do fit into one of the categories for whom funeral insurance might be suitable, compare policies on the Canstar website before you make a choice. We’re here to help and we’ve certainly done the research. We rated 17 policy products from 13 providers in Australia in 2017, and you can compare them all for price and benefits on our website.
The below comparison table features current funeral insurance products on the market featuring entry age (lowest-highest), sorted by our star rating (Highest-lowest) for a male policy holder in their late sixties and is a non-smoker.