CAPITEC’S Brent Moore explains how a funeral insurance
Insurance is a legally binding contractual mechanism that
helps a person to protect themselves against financial loss.
It is a way of managing risk to your monthly cash flow.
For a relatively small monthly premium, you can protect
yourself against a comparatively large lump-sum payment.
You as a policyholder enter into a policy contract with an
insurer (also referred to as underwriter) and agree to a monthly risk premium
in return for a lump-sum cover amount.
Your monthly premium and related cover amount are determined
by legislation, as well as the risk appetite and experience of the insurer.
It helps a person with responsibilities to manage their
financial lives within their monthly budget so that they do not have to incur
debt or sell assets to fulfil their financial obligations due to unforeseen
The only challenge to saving (in a bank account) is that the
timing, frequency and magnitude of loss is often unknown, so the question to
ask is whether you have saved enough to cover your unforeseen financial
When you consider buying funeral insurance, you should keep
the following in mind:
Understand the role it plays for your overall financial
Having a funeral plan in place is important to cushion
yourself financially during a tough time. While a funeral plan cannot ease the
pain of your loss, it can help to make the path ahead just a little bit easier.
Making financial plans to be able to afford your own funeral, or that of your
loved ones, is crucial to ease financial stress during a difficult time of
Who are you likely to be responsible for?
Funeral cover for you and your direct family members will
ensure that the cost of your funeral does not put undue financial pressure on
your family when you die.
Most individuals will also be expected to contribute to the
funeral costs of their parents.
The same would apply for extended family such as uncles and
aunts, grandparents, and nieces and nephews you may be financially responsible
How much cover do you need?
The amount of money you are likely to spend on a funeral
will be determined by the ambitions of the family – the type of funeral you
would like to offer your loved ones determines how much you will spend. In the
case of extended family, you may also find that you will be relied on to
provide some financial support after the death of an adult.
HOW TO CHOOSE A POLICY
Having a funeral insurance plan helps to ease the burden of
financial constraints during the death of a loved one.
As a client, you need to have a clear understanding of your
needs. In this way, you will focus on buying what you want, rather than being
sold what a service provider has in their product toolbox.
Given your understanding of the above, look at value for
money – how much will it cost you (premium) and for what level of benefit
Try to work out cover/cost to figure out the rate for
Stay focused on your needs and don’t let the marketing of
product features distract you.
Do you want cover to pay for your funeral right now, or do
you want deferred benefits such as cash back, groceries or a tombstone a year
after the funeral?
Find out how practical it is to claim on these features, and
how material these features are to the overall benefits of the product.
If you want groceries to help provide for the funeral, know
that you can pay for this with your cover amount wherever you decide to shop
and you do not need to be dependent on vouchers linked to a specific store that
are also linked to certain products for a limited time.
Know what you pay and know what you get.
All product benefits are costed into the premium and, sadly,
are sometimes based on the fact that it is very difficult to claim on some of
Products need to be simple and transparent, and allow you to
be in control of your purchase.
This series is
reported by Daily Sun and paid for by Capitec