- Traps of funeral insurance
- Costs of funeral insurance
- Which insurers do offer outstanding value?
Late last year ASIC released a report on funeral insurance highlighting that many people tend to cancel their policy in the first few years, indicating that at least some of these people don’t really understand what they were signing up for in the first place. CANSTAR research has found that there are funeral insurance policies available that represent value for the over-fifities market. The main challenge for consumers, though, is knowing what to look for.
“Funeral insurance can be a terrific product and can provide peace of mind for older Australians, but there are a number of potential traps, so it’s important to have a ‘must have’ shopping list if you’re looking for a policy,” said CANSTAR Group Manager, Research and Ratings, Mitchell Watson.
“Death is an emotive topic; making an emotional decision when choosing any form of insurance is not a good idea though.”
Some questions to ask before choosing a funeral insurance policy include:
Is there a cap on premiums? Or will you keep paying and paying and paying until you eventually leave the earth? A good value funeral policy will specify a cap on the amount you can pay in premiums over the life of the policy.
Will total premiums be paid back? If you do end up paying more in funeral insurance premiums than your benefit, is there a “guaranteed benefit”? That is, will the insurance provider repay to your estate those extra premiums you’ve paid over and above the funeral benefit?
Are the premiums stepped? Policies may charge a stepped premium (a cost that increases each year, as you age) or a level premium (a premium that increases only with indexation). CANSTAR only rates level premium policies; if you are considering a policy with a stepped premium, ensure you know what that premium is likely to be in 10 or 20 years’ time.
“It’s certainly not the case that all funeral insurance policies were created equal,” said Mr Watson. “It is a case of buyer beware.”
What does funeral insurance cost?
“As with many other types of personal insurance, the cost of your cover will depend on your age when you take out the policy, whether you’re male or female, your lifestyle habits and your health,” said Mr Watson.
CANSTAR’s research found the following average monthly costs of funeral insurance across the policies assessed:
|Gender||Age||Smoking Status||Average Monthly premium|
|Source: www.canstar.com.au. Level premiums only.
Premiums collected during April for the 2016 50s and Over Funeral Insurance Star Ratings
“As usual smokers pay more for their cover,” said Mr Watson. “Males also pay slightly more than females at an equivalent age due to their shorter life expectancy.”
Which insurers offer outstanding value?
CANSTAR has researched and rated 19 funeral insurance policies from 15 providers and is pleased to congratulate InsuranceLine and NRMA on winning the 2016 award for Outstanding Value Funeral Insurance.
Both InsuranceLine and NRMA have won this award two years in a row, with both products offering an impressive combination of competitive price and, most importantly, good features.
“No-one really wants to claim on personal insurance of any kind, but when
we do need to make a claim it’s likely to be when we are emotional and vulnerable,” said Mr Watson.
“Knowing that we have a well-featured policy with a fast turnaround time can make a fairly fraught process just a bit smoother. CANSTAR congratulates InsuranceLine and NRMA on the value they provide in this market.”
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CANSTAR provides Australia’s interactive online research service in consumer and business finance. Founded in 1992, CANSTAR Pty Limited is Australia’s researcher of retail finance information for over 250 institutions such as Banks, Building Societies, Credit Unions, Finance Companies, Brokers, Mortgage Originators, Life Companies and finance related Internet Portals. CANSTAR customers use the extensive database for competitor analysis as well as a means of disseminating their product range. CANSTAR also distributes this information to print and electronic media for publication and to Agents, Accountants, Brokers and Internet Portals for use in advising their clients.
What are the CANSTAR star ratings?
CANSTAR researches, compares and rates the suite of banking and insurance products listed below. Results are freely available to consumers who use the star ratings as a guide to product excellence. The use of similar star ratings logos also builds consumer recognition of quality products across all categories. Please access the CANSTAR website at www.canstar.com.au if you would like to view the latest star ratings reports of interest.
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