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Do I need to take out a Funeral Plan?



This article explains the features of a typical funeral plan. Funeral plans come in three forms: 1) Individual cover, 2) Family cover, and 3) Cover for Parents where age is a vital factor to the product.

Typical cover can range from as little as R5,000 to R50,000. Funeral Plans pay out a tax-free cash lump sum for funeral expenses, so it is also called burial insurance.

Funeral Plans and Policies The premiums to be paid are directly dependent on the level of cover and age of the insured. For R5,000 cover one can expect to pay around R12 a month at the low end of the spectrum, and for R50,000 cover expect to pay over R100 a month − all entirely age dependent. The older one is the higher the premium.

Purpose of Funeral Plans

A funeral plan is designed to ease the financial burden during a difficult time by contributing towards the cost of a funeral on the death of the insured person/s by providing the nominated beneficiary with a lump sum payment;

Also, many of the products on the market cover more than just funeral expenses. There are smaller benefits that come with the product. These benefits vary from one company's product to another.

A funeral plan pays out a lump sum on the death of the insured or extended family covered by the policy. The money can then be used at the beneficiary's discretion for funeral arrangements etc.

Why take out a funeral plan

We work and save during our lives, to protect and grow our investments for rainy days, educating our children and maintaining our home. But death is also a real expense. Funeral cover emerged to protect and save people from the high cost of a funeral.

Ideally one does not want to use money from savings that are meant for the above plethora of life's needs. That is why funeral cover is so important − especially for low to middle income South Africans. It keeps us on the path to financial security by specifically easing the burden of funeral costs.

Furthermore, many service providers in the funeral industry typically want cash up front for funeral arrangements, so the lump sum pay-out of the plan greatly assists you in meeting these obligations.

Please take note If a breadwinner dies, banks will freeze their accounts to process the winding up of the deceased's estate. This can make it very difficult to access money to pay for funeral expenses, so that is where funeral plans can really help.



Key considerations

Your assets available will determine whether a funeral plan is important for you or not. Ask yourself if you can afford to pay for a funeral and all the arrangements that go with it − and if the money is readily available on short notice.

If not then a funeral plan will dramatically increase your peace of mind and capacity to deal with a very traumatic experience in a person's lifetime.

It is thus very important to ask these questions today, to best prepare you for the future.

Funeral cover is reasonably clear and simple to understand. The companies that offer this type of cover generally have two or more options for you to consider.


They will typically vary the level of cover and thus adjust the premium accordingly. The choice you make is as to your preference. Think carefully and do your research before accepting the policy.

The following Funeral Plan criteria are very important to look out for:

Timely pay-outs

According to the Association for Savings and Investment SA (ASISA), one of the key features of funeral insurance is that the benefit is paid out very quickly, often within 24 to 48 hours.

This is necessary because the benefit is designed to cover the cost of the funeral. Therefore very little claims information is required, often only a death certificate.

Please take note Check that your product provider will pay out within 48 hours or less! This is very important. But note that there are many complaints to the Ombud regarding this promise.

Cover, Term, and Premiums

Cover amounts must be stipulated clearly and what the cost to you is, in the form of monthly premium.

Funeral benefits are a specific insurance class as defined in the Long-term Insurance Act and the maximum benefit that can be paid is currently R30,000 from ages 7 and above.

The product is usually sold for a fixed term, for example 10 years, or for the life-time of the insured and premiums are paid for the benefit term.

Premiums are usually not guaranteed and may be increased should the insurer feel that the premiums are insufficient to cover the claims and expenses.

Standard funeral products require you to pay monthly premiums, whilst Prepaid Funeral Cover products accept once off premiums − where you pay one upfront premium for let's say, 6 to 12 months cover. You are then obliged to pay a top-up premium after that term to keep your cover continuous.

Valuable tips For prepaid funeral cover see ABSA's Prepaid Funeral Cover and the Old Mutual Pay When You Can Plan »

Waiting Periods

Due to the fact that very little or no underwriting is done on funeral benefits, it is usual to have a waiting period during which no (or a reduced) benefit will be paid. The waiting period will typically be six months but can vary substantially from one product to the next, warns ASISA.

Please take note Underwriting is a process undertaken by the insurer to actively assess their risk. They may require further information from you, take that into account, and adjust your premium according to the corresponding risks.

Plan options

Cover types, can be in the form of individual cover for yourself, for your immediate family or your parents and/or parents in-laws.

Additional benefits

Funeral benefits also known as 'assistance benefits', come with added words such as death and disability benefits - which are very confusing! Often leaving you wondering what the conditions attached to such benefits are, and how much extra is it costing you.

Please take note Just make sure that your core product requirement of funeral cover is the bulk of your 'cost' and that cover levels are adequate.

Ask yourself will you get enough paid out to you to cover the funeral with some leeway for unforeseen expenses − that will be a good guide.

Product enticements

Product enticements such as 'cash back bonuses' or assistance with legal expenses, are good when comparing value across a range of products, but first make sure you are happy with the other points mentioned above as these are much more important considerations to your funeral cover of choice.

These are also called 'Value Added Benefits'.

Exclusions

Exclusions are conditions upon which you are not covered. These imposed conditions vary from company to company. Common exclusions would include a two-year suicide exclusion, any pre-existing conditions, self-inflicted injuries, substance abuse, war and riot, amongst others.

Please take note For full details on your particular policy's imposed exclusions, see your Policy Document under a section called Exclusions.

Claims Process

Get an idea of the company's claims process policy. It is common practice for certain forms to be filled out before claims can be assessed. It is important to submit all required claims documents as soon as possible so that you don't hold up the process from your side. Time is critical during this difficult time.

Cooling off period

A mandatory 30 day cooling off period should also be afforded to you on the funeral policy. This entitles you to cancel the policy if you are not happy with it for any reason, within 30 days of taking it up.

Please take note Note that the insurer could deduct administration charges from your paid premium before any refunds are settled.



Choose from two of SA's best funeral insurers ...

Hollard Funeral Plan Hollard Funeral Plan
Affordable funeral cover ranging from R10,000 upto R75,000. Get 20% cash back!
Clientele Ultimate Dignity Plan Clientele Ultimate Dignity Plan
Plans available from R132 per month. Enhanced benefits. Claims paid in 24 hours.
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