Posted on 1 April, 2017 at 9:40

It is definitely possible that the amount you pay in funeral cover premiums over a period can be more than the sum insured amount. But, the good way to look at this is that if this does occur you must have lived a long life, almost certainly quite a few years more than the average life expectancy.

Funeral Insurance is not alone in this potentially happening though. For example the writer, at age 55, has had health inusurance for nearly 30 years and I am happy to say have never had a claim. It is possible I will never have a claim but I would rather this situation of paying premiums and not claiming than the other way around. The difference between health insurance, and other covers, where it is possible you will never claim is that there will be an inevitable claim on your funeral insurance. So, even if you end up paying more than the cover you still will benefit form the claim payout eventually.

We do, however, like the idea of the funeral insurance covers that have an age cutoff where premiums cease and cover continues for free. There are options that exist like this at age 85. So, in those cases even if you have paid more than the cover amount this premium cutoff at least caps the amount of ‘extra’ payment.

There is of course another way to look at this, it is unfortunate but there are some people who will pass away before they have paid the cover amount in premiums. For example someone with $10000 cover may have only paid a small portion of that amount if they passed away, let’s say, 3 years after the funeral cover commences.

Funeral Insurance is no different than any other insurance in that you take the cover to protect against the unexpected. If it was guaranteed you would pass away at a certain time you would not need funeral cover as you could plan in other ways. You take a funeral cover so that there is money for your funeral whether it be needed sooner or later.

Some people suggest a saving scheme is superior to a funeral insurance. In hindsight if you are still around in 30 years you might think this was better but the strong negative is that it is impossible to save at a rate fast enough if something were to happen sooner rather than later. And, from what we get told this money that is being saved for a funeral would also be the first to go if the car needs repairs, or more major house maintenance is required.

Paul Woollams, Funeral Insurance NZ