Do you need funeral insurance?
Superannuation | 9/10/2018 |
8 min read
You may have seen the ads on television? Perhaps you received a sales call? Funeral insurance has been marketed aggressively in recent years, and the sales pitch is very familiar – you need cover to protect your family from unexpected bills when you die.
But is that really accurate?
Are you adequately covered?
Funeral insurance is advertised as a specialist product, but the reality is it’s no different from a general life insurance policy. The insured sum is paid upon death with no restrictions on how it is used.
That’s important, because if you have superannuation there’s a good chance you already have an associated life insurance policy. In other words, you’re probably already covered. And when it comes to life insurance the sum is more likely to be in the hundreds of thousands.
How much does a funeral cost?
According to a 2014 report from ASIC (Australian Securities and Investments Commission), the average benefit for a funeral insurance policy was $8800. Another report from 2017 noted that the average cost of a moderate funeral was $6000.
That may sound reasonable, but a study by the Combined Pensioners and Superannuants Association found that if you took out funeral insurance aged 50 and lived until you were 80 you would have paid $140,000 in premiums for a payout of just $6000.
The rising cost of funeral insurance
Many funeral insurance policies have stepped premiums. These increase as you get older. So the longer you hold onto your funeral insurance the more expensive it becomes. For pensioners on fixed incomes, the rising costs mean many people eventually stop paying the premiums and allow their coverage to lapse.
Studies show that 80% of policies are eventually cancelled with no payout. 55% within the first year. That’s eight out of 10 people who pay their premiums for no benefit.
Insurance and superannuation
Funeral insurance is sold on the convenience it offers; payments are usually processed in weeks rather than months. But it comes at a heavy cost. Especially when you take into the account the life insurance your superannuation policy offers.
If you’re concerned about funeral expenses and your insurance coverage you can learn more about your specific policy by logging into Equip. You can also give our helpline a call on 1800 682 626 or speak with a financial planner.
Some additional notes
- Equip's death cover ceases at age 70
- Making a bind nomination can help speed up the payment process
This information is provided for general information only. It does not take into account your personal objectives, financial situation or needs and should therefore not be taken as personal advice. You should consider whether it is appropriate for you before acting on it and, if necessary, you should seek professional financial advice. Issued by Equipsuper Pty Ltd ABN 64 006 964 049 AFSL 246383. MySuper Authorisation Number 33813823017672 (‘Equip’, ‘the Fund’ and ‘the Equip Rio Tinto Fund’).