Ester Ochse | Product Head | Integrated Advice | FNB | mail me |
Hlengekile Jita | Funeral Product Manager | Insurance | FNB | mail me |
The importance of planning your finances to ensure that you protect your family’s future for a time when you or your loved ones won’t be around anymore is immeasurable.
We believe in integrated advice, and one needs to consider the importance of protecting their family should the worst happen. We also believe that one should have the right cover for the right need at the right time. Therefore, it is time to have the debate of funeral cover versus life cover.
Different roles
Each type of cover is important in their own right, but each plays a very different role in how they can benefit a family, the right cover in place can make tomorrow better. In the unfortunate event of death beneficiaries can access their funeral cover and receive pay-outs within 24 hours while life insurance offers dependents long term financial support.
The death of a loved one is not only emotionally difficult, but it can add unexpected financial strain to a family or those left behind. The average funeral in South Africa costs about R35,000, it is important to plan for this and get the right cover.
For funeral expenses, funeral cover is the best option and with a funeral plan you can cover several family members if they pass on. These funds should then be used for all the expenses that are associated with the funeral e.g., coffin, transport and catering for the funeral. Ensure that the plan that you have caters for your family’s needs, like our funeral plan which can cover up to 21 immediate and extended family members.
Different amounts
Life cover is the solution to take care of your financial dependants in the event of your passing. Life cover is typically used to pay for any outstanding debt, children’s education and other living expenses.
The cover amount in life cover is higher than what one can get with just funeral cover. It is a good idea to get financial advice to assess how much life cover one needs to ensure your family is well taken care of once you are gone.
Life cover on average is cheaper per R100,000 of cover compared to funeral cover. Let’s look at Thandi, for example, she is a 30-year-old female who is a non-smoker. Let’s assume she has taken out three funeral cover policies, all which cover her for R100,000, her mother (aged 58) for R50,000 and her sister (aged 20) for R50,000. Premiums for each policy will be approximately R421, so in total she is paying about R1,263 per month for all three policies.
Underwriting
One of the biggest differences between funeral cover and life cover is that life cover requires underwriting.
Underwriting allows an insurer to assess your risk profile and may comprise of a few questions or even medical tests for higher cover amounts, this information then allows the insurer to determine whether they can provide cover to you and provide you with the best price for the cover you need. And what’s more is that some life cover policies have a funeral benefit included which will pay out within 24 hours, allowing your family to cover funeral expenses while waiting for the life benefit to pay out.
So, if alternatively, Thandi took up a life cover policy of R500,000 her monthly premium would be R107.86 and if her policy is with FNB Life she will have an additional R30,000 funeral benefit. She will still need to get a funeral plan for her mother and sister, but that will now only be R255. Giving her a potential saving of R900 per month for a lot more cover.
Life cover for herself will be R500,000 and funeral cover for both her mother and her sister will be R50,000 with a total premium of only R362.86. Therefore, if she would like to free up some cash flow for her other financial goals, she should consider a life cover policy for herself and a funeral plan for her family members.
The savings that she makes, she can put towards paying off debt, or saving for an emergency or other long term financial goals.
