Funeral insurance

Overpriced and overhyped, funeral insurance may be the most expensive way to pay for your last hurrah.

16may funeral insurance hero default

Funeral insurance is sold as peace of mind your nearest and dearest won’t have to pick up the tab for your final farewell. Ads claim acceptance is “guaranteed”. You can sign up on the spot, no medical checks required.

Pulling the purse strings

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Mike Bissenden
05 Aug 2019
Funeral insurance

Does it make a difference when New Zealand Seniors claim they will pay amount insured or pay all of your contributions. With interest rates so low this at first glance seems OK'ísh.

Consumer staff
07 Aug 2019
Re: Funeral Insurance

Hi Mike,

We’ve had a look at the New Zealand Seniors Funeral Insurance Policy. You’re right the policy will pay the sum insured or the total premiums paid, whichever is higher. So you’ll get back what you paid, provided you don’t cancel or miss premium payments.

Like other funeral policies, there’s no refund of premiums if you cancel outside of the cooling-off period or can’t afford to keep up payments.

You’re also not earning any interest on premiums you pay above the sum-insured value. The insurer has the benefit of this extra money – not you.

Kind regards,

Natalie - Consumer Staff

Jon-Paul H.
25 Aug 2018
Missing point

Murray raises some good points, however, the fundamental point needed here, that has not been covered and is the reason there are so many complaints and cancellations, is no advice was taken.
With a suitably advised solution, the consumer should have no surprises and have a solution that works for them.
Yes, if the plan is solely relying on insurance to transfer the risk, there is a chance that they may live longer than anticipated and pay more for the cover than it delivers. That's a discussed point with a good adviser.
As too, taking the savings route, this has the risk of not being contributed to long enough to deliver the desired outcome. i.e dying early.
Where the consumer/policyholder has reasonable health, then an underwritten life cover, suitably structured, is often the more effective approach. They don't have a ceasing of premium option but are often able to be structured in a way that ensures they pay the minimum total premium possible. ie. fixed level premiums for the life of the policy, presently out to age 100 with many providers.
What also has not been stated in the article is funeral cover is life cover, just under another name.
The lack of medical questions is offset by the insurer charging a higher premium for the unknown risk and applying an exclusion period for those that buy the policy with terminal illnesses.
The metrics are relatively simple when understood and explained. The article does not clearly explain to the consumer audience how these work and what the alternatives actually look like.
And nor does it state to seek advice from an appropriate adviser to get it right.
And BTW just because an adviser is likely paid on commission it shouldn't take away from the value a consumer is able to gain from the interaction as they have multiple product options. As most salaried 'advisers' can only sell you their product.
Not to spark the debate on commissions and advisers, if you are looking for a good adviser check out Financial Advice New Zealand, a professional body of advisers who aspire to do what they do better.
(I'm a financial adviser and a member of Financial Advice New Zealand, but I'm not involved in the operation of the professional body, I'm just a member)

Murray F W.
11 Aug 2016
Alternatives - pitfalls

Hello

Consumer's article on Funeral insurance" says inter alia

".....deposits where your money earns interest.

If you want to ensure there's cash on hand to pay your funeral bill, the simplest option is setting up a savings account. The benefit of doing it this way is that you still have control over your money — and you avoid paying the set-up and other fees that typically come with pre-paid plans.

Funeral costs can also be paid out of your estate."

I think this overlooks an important point, viz that at death all the deceased's funds/accounts are frozen (ie cannot be accessed) until either probate (where there's a will) is granted to the executors or administration (where no will) is granted. The latter especially would take some time and this would be an impediment to early access to funds and early payment of a funeral bill. Consumer NZ may like to reflect on alternatives. For instance, while I'm no expert, possibly one way around this would be a joint savings account in both the deceased's and a relative's names with each person authorised to operate the account without the other's signature.

Previous member
16 Aug 2016
re: Alternatives - pitfalls

Hi Murray,

Thanks very much for your comment.

To ensure funds can be accessed without having to wait for probate, we’d advise putting the account in joint names with a trusted family member or friend.

Kind regards,

Jessica
Consumer NZ staff

Tracy E.
30 Jun 2016
AIL Funeral cover etc

Does anyone know much about AIL Insurance American Income Life Insurance Company, they advertise quite extensively in NZ and are said to be partnered with some well established organisations in NZ but I can't find information on them through here in Consumer, I find that wee bit interesting.

Kate N.
01 Jul 2016
re: AIL Funeral cover etc

Hi Tracy,

AIL (American Income Life Insurance) sells policies through advisers, which is why we haven’t included the company in our funeral insurance survey. The company is registered with the Financial Disputes Resolution Service: www.fdr.org.nz.

Kind regards,

Kate,
Consumer staff

Laraine B.
11 Jun 2016
It isn't just funeral insurance that's overpriced

Funerals are too. My family has instructions not to give me a funeral. And a cardboard casket is quite adequate. I want them to enjoy what little we have to leave them rather than use their inheritance lining the pockets of rich funeral directors. It's about time people revolted against having their grief exploited!

Dominic B.
11 Jun 2016
Are "eco" burials cheaper?

I don't like the idea of being burnt, nor of polluting the ground with embalming materials! So I'm interested in the "eco friendly" burials such as those done at the Makara Cemetery... but are they also costly?

Bruce H.
12 Jun 2016
Funeral Costs

A friends father did the same, thinking that they would save the family money by not having a funeral, but the costs were still quite high.

Previous member
14 Jun 2016
re: Are "eco" burials cheaper?

Hi Dominic,

This link has information about the burials at Makara Cemetery, including fees and a guide to the natural cemetery:

http://wellington.govt.nz/services/community-and-culture/cemeteries/burials

Kind regards,

Fonda
Consumer NZ staff