By Vicky Reddy, 18 March 2020
Although these two go hand in hand, it is not the same thing. Vicky Reddy, Head of Actuarial Reporting at Sanlam Sky, lists five things you need to know about funeral cover.
Funeral cover does just that – cover the cost of arranging a funeral. But this can take different forms, depending on who offers the policy.
“If you buy a policy from a funeral parlour, it would typically provide for the actual funeral (coffin, flowers, etc.),” says Vicky Reddy. “Most traditional funeral policies from insurers provide for a lump sum payment to the beneficiary selected, or to the person who took out the policy if someone covered by the policy has died,” she explains.
Some policies offer additional benefits to take care of needs you may not even think of before the time. “These could include things like transportation of the body, accommodation for a family member travelling with the body, a grocery benefit, and so on,” says Reddy.
Funeral cover is easier to obtain, says Karen Bongers, Product Development Actuary at Sanlam Individual Life. “Life cover involves some degree of medical underwriting (health questions and medical tests), and acceptance is not guaranteed,” she explains.
Cost-wise, the premium for funeral cover is generally much higher than that for life cover of the same rand value, and the maximum cover that can be purchased with a particular provider is smaller (generally up to R100 000 for funeral cover vs millions of rands for life cover), says Bongers. Funeral cover is meant to cover the costs associated with a funeral, whereas life cover is meant to cover larger and longer term expenses like future living expenses of dependants, and paying off debt. “It’s important to not only take out funeral cover,” she says. “There is a need for both, and having both ensures a more cost-efficient insurance portfolio.”
If you already have life cover, it’s worth asking your financial planner if you can add funeral cover to the same plan, to avoid additional policy fees, says Reddy. They’ll take your needs into account and be able to help you decide on the right cover for you .
You can choose to insure your own funeral expenses, or cover extended family, like aunts, uncles and cousins. Policies will vary across different insurers, so in order to find the best funeral cover for you, it’s important to look at your needs and those of your family, says Reddy. “Think about how many people there are in your family, whether you would be responsible for their funeral, and consider how much you can pay towards funeral cover.”
There is also an age limit for cover. “Most funeral policies allow you to purchase cover for yourself and your spouse up to the age of 64,” she says. “There are some plans that allow you to purchase cover for yourself up to the age of 74, which means it is seldom too late to get funeral cover. You do need to be at least 18 years old to take out funeral cover.”
First, it’s important that the right people know about the policy to avoid delays with payout. “Sit down with your family and beneficiaries and tell them that you have funeral cover,” recommends Reddy. “Show them where the policy documents are saved or stored. You can give them copies or give them access to these.” Then, when anyone needs to claim, they should know which insurer to contact, and the policy number.
The turnaround time for a funeral cover claim payout is normally 24-48 hours, but this depends on your insurer and how quickly they receive all required documents, says Reddy. Sanlam pays out most valid funeral claims in 4 hours, once the relevant documentation is received.
A rule of thumb is to shop around. “Try to compare three or four policies in terms of your family’s needs, the funeral provider’s reputation as well as the ability to pay claims, before choosing the one best suited to you,” suggests Reddy. Your monthly premium could be as low as R50 to cover you and your family, but depending on the benefits you’ve selected, this figure varies across insurers.
Ask your financial planner about each policy’s benefits and exclusions, she suggests. Take into account who can be included in the cover: “Ensure that the extended family members you want to cover are related to you according to the rules of the insurance company.” When it comes to premiums, she recommends asking about how annual premium and cover increases work, and what happens if you miss a payment.
Book a meeting with a financial planner to consider your funeral cover options and choose the one best suited to you and your loved ones.
This article was prepared by Sanlam Reality.