Funeral Insurance: How to Avoid the Guilt Trip

Alex wades into the murky waters of funeral insurance vs. life insurance to bring some clarity to a conversation often thick with emotion.

Recently, during an insurance review, a client had an important question for me: “I have bought some funeral insurance over the phone, but I don’t know what it does? Could you help me understand it?”

Needless to say, I was quite surprised not only that someone even offered such a complicated product over the phone but also that it was purchased without full knowledge of what it was. On the other hand, the client felt obliged to take it out. The phone salesperson knew exactly what to say to use guilt to make the sale.

Funeral insurance might seem a straightforward product, however, the mechanics behind it are not. Funeral insurance is a sort of insurance with hardly (if not any) underwriting requirements. This means that, whether you’re healthy or unhealthy, you will pay the same price based on age, gender and smoking history. Because of the lack of thorough health checks, it is quite expensive for everyone.

In this particular case, the funeral insurance was 15 times more expensive than regular life insurance! The reason the client purchased it was due to their love of for their children—they did not want their passing to be a burden on their family.

I finished the review by explaining that life insurance policies actually have a funeral benefit or early payment of benefit built-in. Your family will have access to an advancement of up to $15k upon receiving a notification of death. So, life insurance can have you covered for funeral insurance and all on a much lower premium. I advised the client to cancel the funeral cover as there was no reason for a young, healthy professional to have it.

Moral of the story, if you have any questions regarding insurance policies or know of someone with questions/doubts, come and have a completely guilt-free and obligation-less chat to an adviser at Velocity Financial.

 

Alex Barendregt is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.