With a broad market in funeral policies in South Africa, it is often difficult to gauge what you are banking for your buck. What is the policy really giving you compared to the next? Where does the added value come into play? It’s truly not easy to compare policies to make sure that you’re getting the fair deal that you deserve!
When it comes to funeral insurance, you can't only look at the premiums. Because, while one insurer may be less expensive than another, another insurer may be able to provide you with far greater value for only a few Rands more!
At the end of the day, your goal behind taking out funeral cover might be to ensure that you and your family members get the send-off deserved.
Funeral cover also ensures that you or your family don't have to empty savings accounts or take on more debt to hold a proper burial. Funeral cover will assist the people left behind to grieve in peace. Having a funeral cover not only covers costs in the case of your death.
It also allows you to cover other members of your household, including your parents and your extended family!
It makes sense that there is a lot of competition for your business seeing as funeral insurance is a popular financial product in South Africa.
The most common thing that directly affects the cost of your funeral cover is that you are insured for is the amount of benefits you will get if you claim. The number of people you want to be covered on your policy, your current age and the age of family members you insure. There are also some less obvious factors that influence funeral cover premiums. Here are some key things you may not know:
Most funeral cover policies are sold without underwriting, so you don't have to answer lots of questions about your health or go for medical tests. But you can get significantly cheaper funeral cover that is underwritten - for example, as an additional benefit on a life policy.
But, don’t be afraid of the medical exams that might be a requirement from funeral insurers, it might be beneficial for you to clarify your general medical status anyway…
If your funeral cover offers a group benefit, it is likely to save you in premiums! Consider including your family under one policy, making it quick and easy for you.
Andrew Codd, divisional director of emerging consumer market products at Liberty, says premiums can be anything from 25% to 50% cheaper this way, and Lee Bromfield, CEO at FNB Life, estimates they will be about 30% cheaper with a group!
Felix Kagura, head of Life Assurance at Standard Bank, said it is usually easier for an insurer to estimate the risks it faces in a restricted group. Typically, a group funeral policy covers you and your immediate family only, not typically your extended family. A reason for this may be that you likely eat similar foods, and do similar activities (on average). So you need to consider whether group cover or individual cover is best for you.
Codd also says group policies are repriced annually based on the claims experience and the average age and living standards of the employees covered. But, individual policy premiums and increases are set at the start of the policy and you are well aware of them going in. Individual policy premiums are largely based on age, which means they may be cheaper than group policies when you are younger, but they may get more expensive as you get older.
It is important that you not only compare the starting premium you are quoted for the funeral cover, but ask how premiums may increase in future. It’s better to know what the premiums may cost in five years’ time.
Say for example two insurers offer you the same cover and the same premium, but one may increase premiums by 10% annually, while the other increases by 5% annually, or one increases the cover amount annually and the other does not at all.
These are the real questions you need to be asking about funeral cover, for obvious reasons!
⇢ Initially, the premiums may look the same, but eventually, over time you may pay for more or be covered for less in real terms (after you take inflation into consideration) depending on which product you choose. Some policies' premiums increase at higher rates each year as you age, so premiums may start low but have really high annual increases.
To make things more complicated, the insured benefit you will get if you claim may increase each year at a different rate to your premiums. For example, the benefit may increase by 6% but the premium will increase by 10%.
In terms of policyholder protection rules, providers must give you information about increases when you take out the policy. But for security, take it upon yourself to ensure you are well-informed before making your decision.
Funeral insurers always want you to keep paying your premiums, so they usually offer cash-back bonuses if your policy is still active after a certain period of time.
For example, Liberty offers to pay you back five premiums if your policy is still in place after five years, regardless of whether you claimed it or not! Remember, the cost of this benefit is built into the premium and it is only worth your while if you keep the policy going over time.
So with this in mind, consider how much the cash-back benefit is for your policy and figure out when you qualify for it.
Cash-backs can clearly be very tempting and enticing but these and other value-added benefits often have very little to do with your need to cover the funeral you want. So try not to lose sight of the purpose of the funeral cover and the tangible funeral benefits.
In this day and age, especially since Covid-19, it is no surprise that newer funeral insurers sell policies online only. This lends itself to lower distribution costs than those organisations with large branches and brokers. It is something to be aware of and many of which are trustworthy, just use your instinct!
It is important to consider whether the particular policy covers you for your whole lifetime, or whether it is a limited-term policy. If it is for a limited term, the premium should be lower than a lifetime policy because your cover will end if you survive the term and you will need to seek another option. At that stage you will have to start over by buying a new policy, which is likely to be much more expensive because you will be older, she says.
Some insurers offer you cover for the whole of your life, but stop charging you premiums at age 65 or even 85. This could be a valuable benefit when you are older and living off a pension but it will mean a higher premium when you are younger, but you will be earning an income presumably.
The key when it comes to taking out funeral cover is to be sure about all the details. Like the famous phrase goes, the devil is in the detail! You want to make sure that you have the most beneficial funeral cover that will work for you at the best price you can get it!
The above will just take you through the hiccups and catches you might find along the way! Very important to consider these things and make the best choice for you and your family! You deserve a good funeral when the time comes.