I am 60 and have Life Insurance, why might Funeral Insurance be a better option?

Posted on 23 July, 2017 at 3:40

We get a lot of people with current Life Insurance enquire about Funeral Insurance, especially as they reach 60-65 (or older). It is a very common, and understandable, question and tends to be asked on renewal of the life cover when a customer sees a year on year increase of 10%, 15% or even more. Unless your premium was fixed until a certain age, life premiums are based on your current age so the older you are the higher the premium. And of course each year you become older so the premium rises.

So, you get an anniversary notice with another big increase on top of all those in previous years. Where to from there? For those who maybe no longer have debt or do not feel the need to provide a lump sum for any other family members then they often consider it best to alter cover to just pay the costs of a funeral. A funeral cover then springs to mind, often in the hope of lower premiums too.

In some cases funeral insurance premiums will be cheaper than you are currently paying for your life insurance but that depends on the levels of cover. But there is one major difference, that is the funeral plan premiums are fixed for life when you commence the cover. So, on day one the premiums may be higher than what you alre already paying but they are not going to go up year on year as you age. At the time of considering this new funeral cover you must also remember your life premiums will go up and up and up and eventually may simply become unaffordable, often at the time you need it most.

The issue we see nearly every time someone consders a move from life insurance to funeral insurance is this cost complication, particularly where the life cover is still cheaper at that time of consideration. All you really can do is to try and project costs out and make a decision based on fixing premiums now or just carrying on with life cover. It is often really tricky with no obvious answer. If you leave the funeral insurance for a few more years then it will be more expensive ongoing at that time because it will be based on your new, older, age.

If we can help you with some numbers we are happy to do so, might make the decision making easier.

Paul Woollams, Funeral Insurance NZ

Real life example of a funeral insurance being a benefit to the family

Posted on 14 July, 2017 at 5:20

About 5 years ago we arranged a funeral cover for Viliami who was 67 year old and living in Auckland. His wife had died a year earlier and he was now living with his son and family. The family did not have funeral insurance for Viliami’s wife and the costs associated with the funeral were close to $20000 as there some family members from Samoa who wanted to attend the funeral in New Zealand but needed help with money for fights. Viliami and close family mainly borrowed from other family and also needed a high interest personal loan as well.

So sadly, on top of the loss of a wife and mother the family also had a loan for 3 years to worry about too. To prevent this situation again funeral cover was arranged for Viliami. His son assisted with the paperwork (but Viliami had to sign as the person being insured) and he was also shown as the nominated beneficiary. The son also set himself up as the person to make the premium payments but other family were going to pay in his bank account to share the cost. The funeral cover insurance was taken for $20000 as they knew that again they would need to help some Samoa based family fly to New Zealand for the ceremony as well as paying for all other costs. The monthly premiums were affordable for the extended family to pay and they then had peace of mind for the future.

We heard recently that Viliami had passed away. But his son did call us sometime after the funeral to let us know that the funeral insurance money had come through within a few days and that it had helped everyone so much when they were trying to cope with all the other sadness with his fathers passing.

It is quite common that with Pacific Island families they experience quite high funeral costs because of the expense to bring family members from overseas. Funeral Insurance is of great benefit to help pay for this. And as funeral insurance premiums can be paid by any family member it is easy to arrange cover and have various family member helplng in the cost of the insurance.

Paul Woollams, Funeral Insurance NZ

Is there any stand down period on Funeral Insurance NZ?

Posted on 27 June, 2017 at 9:20

All Funeral covers in New Zealand have a stand down period of 2 years for all death claims arising from natural causes. So, this is where someone passes away as a result or any illness or because of an age related condition. The distinction is that natural causes is anything that is not a sudden unforeseen ‘accident’.

All Funeral Insurance in New Zealand is guaranteed acceptance with no health questions asked. So, regardless of your current or previous health any New Zealander (or resident) can buy funeral cover as long as they meet the entry age criteria. Because acceptance of cover is automatic the insurers must prevent against the situation where someone with a terminal (or near similar serous illness) illness purchases cover, pays premiums for a few months and then has a claim paid for $10000 or $20000 et.. Most people would appreciate that you could not have a situation where someone with a very short life expectancy takes funeral cover (realistically at the last moment) just to claim shortly thereafter.

While to some this may seen harsh it is actually perfectly fair. Funeral Insurance premiums would be impossible to set if you insured anyone at anytime for automatic cover. For people who are already very ill they can of course buy cover but may see no potential for a full sum insured payment if they do not survive 2 years.

In the event someone does pass away as a result of natural causes in the first 2 years the standard rule is that 100% of all paid premiums are refunded (so this effectively becomes the claim). So, the worst case scenario is that you are no poorer off financially, you do not lose the premiums you paid in this specific situation.

In the first 2 years (and beyond) you are however covered for death by accident. More common exampes would be car accidents, drownings etc. So, the 2 year stand down period does not apply to accidental death.

All funeral plans in NZ have this same 2 year stand down period and refund period (or close to each others criteria for this) so you cannot simply try another insurer for more favourable stand down terms. However, for a reasonably healthy person the stand down period probably sounds worse than it really is. Other than for maybe a sudden fatal heart attack the majority of illnesses you may be diagnosed with will not result in your passing within 2 years. This is especialy so in more recent times with the advancement of modern mediciine. So, all going well with good health now the odds of passing by natural causes within 2 year is not too high.

For those who specifially want life type insurance with immediate cover the only viable option is life insurance. However, unike funeral insurance, the acceptance of this insurance is based on your previous and current health. So, if you are healthy insurance.cover may be easily obtained even for those aged up to 65. Again, unlike a funeral plan that has fixed premiums the life premiums rise each year so may not  be affordable come the age you most need it. And with a life cover if your health is not so good when you apply, especially if you have limited life expectancy then that type of cover may not be able to arranged anyway, especially the more serious the illness issues.

Paul Woollams, Funeral Insurance NZ

Is Funeral Insurance worthwhile or not?

Posted on 21 June, 2017 at 2:30

An article recently appeared in the media suggesting funeral insurance was not a worthwhile purchase and instead people should just now put a lump sum of money aside in a separate bank account so it can be used at the time to cover your funeral expenses.

If you have $8000 – $10000 spare cash (or maybe up to $15000 depending on your likely funeral requirements) and you will never miss this money again, ie never want to use it when other money runs tight) then we 100% agree that putting that money aside in a saving account is a better option than taking out a funeral cover. Remember however to make sure it can be accessed by others once you have passed, for example by using a joint bank account.

What the article however fails to understand that the very reason funeral insurance exists is because many people do not have that amount of cash readily available to just put aside and never use again. And at age 65, say, do you really want to tie up that money for what could be 10, 20 or even 30 years?

I would suggest that very few people who currently take out a new funeral insurance in New Zealand, have large cash sums available at the time they buying this insurance. Those people do not typically buy a funeral plan already so the article was not really helpful in that regard. Funeral Insurance, like most insurances, is a very reluctant purchase. No one takes much joy in paying for insurance, I certainly do not enjoy and I am a advisor who understands better than most the value of funeral covers as we see the benefit come claim time for our customers.

Funeral Insurance is beneficial to anyone who knows that at the time of their passing the costs of their funeral will present some financial difficulty to those left behind. We accept that cost  is a completely separate factor and that there is obviously a premium to pay which can prevent this type of insurance being for everyone. Sadly, some of the people who most need funeral cover are the same people who can least afford it.

If you have ready cash to put aside for your funeral then that is a good idea and we encourage to do this. But, don’t spend it when the car needs repairs or you need a new hot water cylinder etc! If you do not have a spare lump sum check out funeral plans as there might be something suitable for you at a cost you find affordable.

Paul Woollams, Funeral Insurance NZ

Who should I nominate as the beneficiary on my Funeral Cover Plan?

Posted on 15 June, 2017 at 9:50

The reason funeral insurance is available is so people can receive a cash sum of money to provide immediate help to pay their funeral expenses. So, it stands to reason that the nominated beneficiary is someone trustworthy and close to you. And ideally it should be someone you expect will live longer than you do.

As a general rule for a joint policy the beneficiary is named as the spouse. If one partner passes away then the money can be paid the the spouse which is often the most obvious person to take the main responsibilty for the funeral and associated costs. As the beneficiary can be altered at any time it then simply means that if one partner passes then the remaining insured person would then nominate another person (as their spouse would be around then).

The only potential issue with this is that if both insured persons die at the same time then the money would have to be paid to the estates which would delay things. However, this is typically only likely in the event of an accident so it is unlikely. If this is something that worries you then you would nominate another person, maybe an adult son or daughter to prevent this being an issue.

For a single applicant the beneficiary is normally an adult son or daughter or in the event there is no family then a trusted friend.

In some instances we get a family member, say an adult son or daugther arranging cover for their parent(s). In this instance they often also take responsibility for being the nominated beneficiary.

Do you need funeral insurance if you own a house?

Posted on 22 May, 2017 at 9:55

Funeral Insurance is ideal for anyone who knows there will not be quick and easy access to funds of maybe $7500-$15000 to cover the costs of a funeral. This could be funds from yourself, a surviving spouse or dependants.

In many cases people do have assets such as a house but this in itself will not mean easy and quick access to funds is available. If there is a surviving partner you cannot rely on proceeds of a house sale or taking a loan against the house. If the person who has passed does not have a partner. and owns a house, then it is true that some funds may be available in due course. However, that would rely on the house sale process and it might mean the sale proceeds may not be available for a considerable time. A funeral would need to be paid almost immediately in most cases.

So, waiting on money from a house sale is unlikely to assist in the prompt payment of any funeral expenses. A funeral insurance plan mght be sensible even if funds may be otherwise available eventually.

There is also the situaton where the person who passes away may have money but it may not be available to others to access. It may take some time for it to be available if there are issues with a will etc. Other than funeral insurance being in place someone wtth funds can look to open up a bank account for the specific purpose of covering funeral costs but they must make sure the account is a joint one with the other person having full access to withdraw funds with their authorisation only. This is very rare that this occurs, mainly as it is hard to plan in advance.

The value of Funeral Insurance Comparisons

Posted on 9 May, 2017 at 6:15

There are a lot of providers of Funeral Insurance in New Zealand so the ability to easily compare their products and premiums is of significant value to a consumer. A funeral cover comparison quickly allows you to see the difference in cover between one funeral cover and another.

Funeral Plans, while largely based on the same idea, ie a cash payment to assist with funeral expenses do differ between quite a bit from one insurer to the next. In fact unless you spend a few hours surfing the net and browsing all the various insurer websites you will never know what is out there and who provides what!.

The team at Funeral Insurance New Zealand provide a specialst Funeral Insurance comparions site. We are aware of the funeral cover provided by up to 10 insurers at one time. We have an easy to read, two page comparison chart, for your information that you can view here.

Funeral Plan premiums especially differ from one insurer to the next, this is just about competition and based on their own claims history.  So it pays to check out at least 3 insurers to see what they offer policy and premium wise. Do not just go with the first one you come across just becaue you see them advertising every day. The big names are not necessarily the best as Funeral Insurance NZ is a niche market with policies provided by some insurers who are not so well known. They may just specialise in Funeral Plans and are really good at it.

So compare polices and premiums for funeral covers and reap the rewards with a great cover ideal for your needs.

Who typically buys New Zealand funeral insurance cover?

Posted on 27 April, 2017 at 10:45

When we look at the last 100 or so policies we have assist our clients with we see the most common age range is 60-65 for the policy holder. Of course we have people in the 40’s, 50’s, late  60’s and 70’s who feel cover is important too. There is really no particular age that is ideal for people to buy.

Buying in the 60’s age bracket does tend to make some sense though. Typically that is the sort of age range when people start thinking a bit more seriously about their long term commitments and also appreciate that the years are passing by and some financial planning may be important. Many people in this age range are still working full time or part time so affordability, certainly in the short term, is less of a concern than say a 70 year old.

Funeral Insurance premiums are also based on your age at the time the policy commences. So, obviously the older you are, or later you leave before buying, this will affect the premiums you pay. Premiums in the 60’s tend to be reasonable still as they still assume you have a good number of years ahead of yourself. As you age the premiums get higher as the average life expectancy remaining for you will be reducing.

Other than just based on your age, cover is typically sought by people who simply know that, regardless of their current age, the funeral payment will be difficult either for their spouse, adult children or for money they can leave behind. Many older people hate the idea that when they pass away it will be a financial burden to their family. And, realistically, in many circumstances this will be the case to some degree. A funeral insurance, although an ongoing financial commitment most people will not prefer not to have, is often the best option to provide some certainty that their funeral costs can be met when the time comes.

Is it possible that the funeral insurance premiums you pay can exceed the eventual claim amount?

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

What are the main reasons people arrange Funeral Insurance Cover Plans?

Posted on 26 March, 2017 at 2:15

In the course of our work we do speak with many people looking for funeral insurance. There are obviously many specific reasons people may be considering a funeral cover but largely the over-riding thing we hear all the time is that they want to make sure their spouse or children are not lumbered with the significant financial burden of paying for their funeral when the time comes.

Most older Kiwis are very sensible about their money matters as they have had to work hard for what they have, whether it be a little amount or a lot. We are also very family orientated and none of us want to see those left behind struggling to cope with the not inconsiderable costs of a funeral. This is especially important when you consider the grief the family are already under.

Unfortunately, many people are not in a position to have, say $10000, left aside sitting in the bank to cover funeral costs. Some people are also asset rich but cash poor so while they may own their house, any cash on hand may not be significant. And Mum cant sell the house to pay Dad’s funeral costs!

So it is very much an inbuilt need to protect those close to us that sees people looking to buy funeral cover. The number of times we have heard that people could not bear the thought of their spouse or children having to try and find lots of money in a short time is signficant.

Having the money ready within days, from a reputable insurer, so that the costs of a funeral can be met does seem to give a lot of older Kiwis a sense of peace of mind and they are prepared to make a monthly insurance commitment to get that financial protection.

Paul Woollams, Funeral Insurance NZ