|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