Yahoo Finance Funeral insurance alternative that's 'more affordable': 'No price rises'
Many people worry they will leave their family in a difficult financial position when they die. Here's one way to avoid this.
As many Australians continue to struggle with cost-of-living pressures, there is a constant need to look out for value-for-money options in just about everything. And this includes funerals.
Mortality is something many of us prefer not to dwell on. We all know it is inevitable – and so are the costs attached to it. Funeral insurance has been a way to ensure you don't leave too big of a burden for your nearest and dearest when you pass away, but like everything, there are always new alternatives being developed. In this case, pre-paying for the costs of your death.
A new survey by Australian Seniors revealed that estimated funeral costs had increased by more than 20 per cent since 2019. As of last year, an average burial now costs $11,039, compared to $9,055 in 2019, according to the report. The average cremation now costs $8,045 compared to $6,334 in 2019.
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Is funeral insurance worth it? Or is it a rip-off?
Australians are paying up to $18,652 for a basic burial funeral, and up to $5,953 for a basic cremation funeral, the study revealed. So, it comes as no surprise that this is a point of stress for many Aussies, in more ways than one.
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There has been a lot of controversy in recent years over funeral insurance, which is supposed to cover the cost of the policyholder’s funeral when they die, up to a particular sum. Consumer advocates have slammed funeral insurance companies for keeping customers paying premiums until they die and eventually paying more than their funerals are worth.
In 2019, Yahoo Finance reported that some Australians had lost tens of thousands of dollars by paying for funerals through funeral insurance.
Prepaid funerals are now becoming increasingly popular, according to Aaron Zelman, founder and CEO of Willed, a service describing itself as "simplifying end-of-life planning".
“It is an alternative to funeral insurance and it is much more advantageous in many circumstances,” Zelman told Yahoo Finance, noting that, without pre-planning, funerals had the potential to really impoverish people.
“The other financial enemy is inflation and rising costs and, if people are not saving in particular for funerals, those costs could be much more than today’s prices,” he said.
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What's an alternative option for funeral insurance?
Unlike funeral insurance - where premiums could potentially go up in price as people age - Zelman explained that prepaid funerals had an agreed-upon fixed price, which covered specific services the funeral provider would deliver.
“So, that means price rises are not the concern of the consumer,” he said. “On this basis, there would typically be no price rises. What you agreed upon does not get re-priced in the future.
“There’s no risk of inflation. The funeral home is committing to deliver the service and, therefore, takes on the burden of any inflationary changes.”
The most affordable package for cremation, for instance, would typically cover services such as basic mortuary care, a simple coffin, all medical paperwork, cremation, and the return of cremated remains in an urn - among others. This would also include a professional team to manage the entire process, Zelman said.
“It gives people confidence to know what they are getting, what it would cost, and its affordability,” he added.
How do pre-paid funerals work?
Zelman explained that these plans could vary from company to company, but typically plans were paid upfront or by instalment.
“Lower-cost options – or higher-value options – would particularly be under $3,000 if paying upfront," he said. "If on instalment, it could be several hundred dollars extra in fees. It would vary between companies, but that’s what you’d expect.”
Zelman added that an instalment plan would often be paid off between two to three years, fortnightly.
In the event a person died before the instalment was paid off, the remaining amount would be payable from their estate, Zelman explained.
How much does funeral insurance cost?
The cost of funeral insurance can be impacted by your circumstances, like age, how much coverage you want and even your smoking status.
A 50-year-old looking for $80,000 coverage would be looking at about $11 a week, according to an analysis from Finder. That will keep getting more expensive as you age.
Based on age, here's the average from three of Australia's biggest brands to give you a better idea.
Age | Weekly cost | Monthly cost |
50 | $10.80 | $43.20 |
60 | $14.97 | $59.88 |
70 | $26.79 | $107.16 |
