Funeral insurance for seniors

Funeral insurance is one way to ensure your loved ones are not left with a big expense at a time when they are already vulnerable.

It is only natural to delay thinking about this type of protection until we get older. The problem is funeral insurance premiums are based on your age, so they increase as you get older.

This means that the policy can become more and more expensive as time goes on. If you end up on a pension, you might not be able to afford it.

Consider your age and stage of life

The younger and healthier you are, the cheaper your premiums will be. But the downside is you could end up paying premiums well in excess of the amount eventually paid out to your beneficiaries, as most funeral insurance companies cap benefits at $15,000.

 

 

Based on Canstar’s average premium data, if you start paying funeral insurance when you are in your early 50s, you could be paying a total of $16,585 by the time you’re 80 for $10,000 cover. That’s if you’re a non-smoker. If you smoke, it could cost you as much as $17,043.

If you are in good health, life insurance might be a better option until you qualify as a senior or reach retirement age. If you have health issues or struggle to get affordable life insurance, funeral insurance may still be worth considering even if you are under 60. Just be sure to compare the pros and cons of each.

Choosing the right funeral insurance

There are many different insurers offering funeral insurance, including Australian Seniors, Real Insurance and Suncorp. It’s always a good idea to compare the different polices first, which you can do using online comparison tools such as Choosi.

There are three types of premiums for funeral insurance:

• • Stepped starts low but increases with age, possibly to an unaffordable amount
  • Level stays around the same price over time but may start at a higher level
  • Capped sets the total at the sum insured (for example, $10,000)

 

 

Other things you might want to take into consideration include:

• • If there is a cooling-off period in which you can change your mind and cancel the policy
  • If the insurer caps the amount your monthly premium can rise over the life of your policy
  • Whether the insurer enables you to cash out the policy at a certain age (generally 85), bearing in mind the amount will be less than you have paid
  • If the policy covers accidental death and what the claim would be
  • When the cover takes effect – generally you are only covered for accidental serious injury and accidental death in the first 12 months
  • What happens if you are diagnosed with a terminal illness
  • If the insurer stops charging premiums after a certain age (generally 85) without a change to your benefits

 

 

Don’t overcommit yourself

It can be easy to fall for a good sales pitch, especially when you want to do the right thing by your loved ones. But don’t overstretch yourself. You may be able to pay the premiums now but factor in rises over time and they may get beyond your budget, particularly if you are on a pension.

And beware of misleading information. According to the Financial Rights Legal Centre, vulnerable consumers are often not told premiums will rise or the extent to which they will rise.

If you feel you have been misled or locked into a policy you couldn’t afford, make a complaint with us and we’ll help you handle it.