Funeral Insurance – is it worth it?

It’s difficult to watch television these days without being bombarded with advertising from insurance companies, the latest trend offering low cost funeral insurance. It seems so easy, pick up the phone and within a matter of minutes you can be covered for the cost of your funeral.  None of us want to pass on financial burdens to our loved ones when we die and the possibility that we can pre-arrange to cover this cost ourselves is quite tempting. But is it really worth it?

The emotional pressure that features prominently in these commercials targeting younger seniors has attracted the attention of the Australian Securities and Investments Commission (ASIC).

In order to gain an insight into the public’s understanding of the options available to cover funeral expenses, ASIC’s Consumer Advisory Panel (CAP) conducted research[1] to explore consumer awareness and understanding of three common products that consumers typically use to pay for future funeral costs. These are:

Prepaid funeral plans – where consumers choose and pay in advance for their funeral.

Funeral bonds – investment products that enable consumers to save for funeral expenses, with the funds withdrawn after death to pay for the funeral.

Funeral insurance – where consumers pay monthly or fortnightly premiums in return for a fixed amount of cover to be paid upon their death.


ASIC’s research found that:

  • Many people do not have a sound understanding of the costs associated with a funeral.
  • People were not aware of the alternative ways to meet funeral costs, such as prepaying by instalments or buying funeral bonds.
  • The term ‘funeral plan’ was often used to describe the three different funeral products in advertising and marketing material, which makes it difficult for consumers to differentiate between them.
  • Many people did not understand some of the key features of funeral insurance: increasing premiums, the total cost of funeral insurance in comparison to the real cost of a funeral, and the consequences of missing payments.


There are a number of risks associated with funeral insurance products that you need to be aware of.  The initial premiums for funeral insurance may seem low to start with and are often touted as being less than a daily cup of coffee.  However, many of the funeral insurance products on the market could see you paying much more than the actual cost of the funeral in the long run.

Funerals in Australia can cost anywhere from $4,000 to $15,000 depending on whether they are simple or elaborate.  However according to a study conducted by Rice Warner[2], you could end up paying over $80,000 for a $6,000 funeral if you took out the policy at age 60 and did not die until you reached 90.  Furthermore, if you were to miss out on paying a premium payment at any stage – all your previous payments would be forfeited.

While it can be a delicate subject, it is one that requires considerable thought. There are a number of ways to save for your future funeral expenses. To find out which option is the most appropriate for you, speak to your financial adviser.

Source: Capstone Financial Planning.

[1] ASIC Report 292: Paying for funerals: how consumers decide to meet the costs

[2] Rice Warner Actuaries, Pre-funding funerals, September 2010

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