Posted on 21 February, 2018 at 23:35

A nice simple answer here, the money can be spent any way you want. The insurer will promptly credit your chosen person with the cover amount as a tax free cash amount. This is paid directly to their bank account as soon as all claim documents are approved. The involvement of the funeral plan provider then ceases, they are not involved in distribution of money which happens in some overseas funeral insurance type policies.

We always recommend the person taking out the cover has a good talk with their beneficiary, when the policy is taken out, so everything is understood in terms of what the funeral cover money is subsequently to be used for.

While the simple answer is that the claim money goes to pay all your funeral costs that is not all it is typically used for. Our customers have told us that other reasons for talking funeral insurance include the following;

Firstly, and of no surprise is that your funeral costs such as any cost of cremation or burial are fundamental uses of funeral insurance together with paying for the service. Often there will be a gathering (where the funeral is held or at a private home) and they can be significant costs when catering for a large group.

It is not unusual to have family or close friends who live in Australia, Pacific Islands or just elsewhere in New Zealand. So it is common to take a higher sum insured to provide funds to help people travel at short notice where the costs can be high. Cover of up to $25000 is often sought to help for this reason. Particularly so for our NZ based Pacific Islands clients who will have some family residing overseas more often than not.

There is also a chance the customer may leave behind some small debt, eg a personal loan, hp or credit card debt. So, by taking a small amount of extra funeral cover that debt can be repaid at the same time as all other costs are being handled.

For these main reasons it is vital the insured person and their named beneficiary have spoken about any expectations to make sure the funeral insurance money can be used as ideally as possible.

Paul Woollams, Funeral Insurance NZ