Funeral Cover vs. Life Cover
We often get clients asking us if funeral insurance is the same as life insurance. The answer is no it is not. They do not serve the same purpose. Both of these financial products will provide financial help in a time of need. This factor is probably the biggest thing they have in common.
Let us look at the main objective of both products. This info will make it easier to understand what the main difference is. Let compare both products in the most basic way.
What is the Cover Amounts on Both Products?
R50 000 to R60 000 is usually the maximum amount you can get on funeral cover. This number is not the maximum amount for the entire policy. You usually get this amount for each person on the policy. In most cases, this will exclude children. Children will have a much lower maximum amount.
Life insurance cover amount depends on the type of product. Some policies are “underwritten” this means you have to undergo medical checks. With these policies, the cover amount can easily go into the Millions. For a “non-underwritten” policy, the cover amount will more likely be in the R250 000 ranges.
Who is Usually Covered?
In most cases, burial cover will be for a family. There are many single breadwinners in South Africa. Many people cover extra family members. You can cover your uncles, siblings, grandparents, etc. There will usually be multiple lives insured on the product. However, some policies have a single member.
Life policies in most cases will be for a single person. Some policyholders will add their spouse and children. However, the policy will most likely focus on the main member. Most life policies will not cover indirect family members. Some “non-underwritten” policies will allow you to cover your extended family. A life policy will usually be for income-generating members.
For what is the Payout Used?
As the name says, funeral insurance helps to arrange the burial. This function is the sole purpose of this policy. The money will help to pay for a coffin, tombstone, flowers, etc. The cover amount is usually not big enough to settle debt, etc. Memorial services cost a lot of money. Not having this kind of policy means you have to pay out of your pocket. The money will be available in 48 hours or less. This helps to make sure you have money quickly. Most funerals take place within a couple of days of death. Funeral insurance providers do their best to make the cash available to you as soon as the can.
When you apply for life cover, you will usually disclose your financial situation. Your broker or advisor will determine the risk on your life. If you have a lot of debts, your life cover will likely be a little higher. Life cover can help your family settle all debt, etc. The money can go towards your child’s education and other important things. Some life policies take a while to pay out. This delay is because often it needs to go through the estate, etc. A life policy might not have money ready for a burial. Some life policies include an option to make a small amount presented quickly.
What Events do they Cover?
Funeral policies will usually only cover death. Death can be due to an accident or illness. Some policies will include an accidental death section. Some providers will pay double if the insured life is lost due to an accident. In most cases, there will not be a waiting period for accidental death. Funeral insurance does not cover critical illness or disability, unless otherwise stated.
A life policy will cover you in the event of death. Most policies will also give you options to cover other events. Events can include critical illness and disability. Some policies will pay upon diagnosis and death. Every life policy will be different. It is important to study the differences. Some policies will exclude previously diagnosed conditions. Sometimes it will be for a period, other times it will be excluded forever.
How is the Cost Calculated?
Because this policy is a “non-underwritten” product, the cost will be basic. The cost will be calculated mostly using age and cover amount. Your medical history does not affect the premium. This element makes getting funeral insurance very quick and easy. You do not have to undergo any medical examinations. Your cost will be the same as your neighbor, provided you are the same age.
You will usually have to undergo medical examinations. Your risk profile will determine the cost of your policy. Medical history, age, and cover amount will all play vital roles. Your current health status can also determine the cost of your policy. It will cost more if you are a smoker versus a nonsmoker