Funeral cover is life insurance that pays out a benefit intended to provide for the funeral of a person covered by the policy. In return for a monthly premium, it typically pays out a cash benefit within 24 to 48 hours of you submitting the death notice, allowing you to go ahead with funeral arrangements with minimum delay.
You are not limited to taking out funeral cover for your own funeral. You can take out a policy that offers cover for the funerals of members of your extended family.
This means that if your spouse, child or elderly parents were to pass away, the policy benefits can provide for the funeral.
Funeral insurance can pay benefits up to R100 000 per insured life. It is regulated as a separate class of life insurance under the Long Term Insurance Act as premiums are often low, affecting the commission paid on these policies.
Not fully underwritten
Most funeral insurance is sold as standalone cover and is not fully underwritten. However, it is possible to get underwritten funeral cover.
The difference in the cost of the premiums if you take out cover on a policy that is underwritten is marked – non-underwritten cover can cost three to five times the premium for underwritten cover, depending on the amount for which you are insured. Read more What does it mean if cover is fully or partially underwritten?
Policies with limited underwriting typically have exclusions on cover for conditions you had when you took out the policy and/or waiting periods before cover for deaths from natural causes are covered.
For this reason you should use funeral insurance to cover the cost of a funeral, but not to replace your income or pay off your debts after you die. It will be cheaper to get underwritten life cover for this purpose.
It is also much cheaper to take funeral cover offered to you as part of a group scheme offered by your employer. This is because everyone in the group takes the cover, whereas when you take it out in your own name, you are probably motivated to do so because someone in your family is old and/or sick.
