In South Africa, funerals can be expensive, with costs often running into the tens of thousands of rands. For most cultures in our beautiful country, a ‘proper send off’ is a necessity, which can create an incredibly large financial burden for the family responsible for the arrangements. Not to mention the fact that handling the arrangements can be rather overwhelming.  

For this reason, funeral insurance is a popular policy. However, is it truly worth it? Understanding the benefits and drawbacks of funeral insurance can help you decide whether it’s the right choice for you.  

Here’s a detailed look at what this cover entails, who it is best suited for, and a few of the pros and cons. All in all, you should be able to make an informed decision based on this introductory information. 

What Is Funeral Insurance? 

Essentially, funeral insurance is a policy that you take out before your death so that it will pay out a lump sum of money to cover the costs of your funeral upon your passing.  

It can be confusing, because life insurance also pays out when you die. However, life insurance replaces your income and provides for the long-term financial needs of your family. Funeral insurance, on the other hand, handles the immediate expenses of your burial or cremation, including the coffin, service fees, transport, catering, and even tombstones. 

The premiums for this type of cover are usually affordable, with policies starting at around R50 a month, depending on the level you choose. The payout can range from R5,000 to R100,000, depending on the policy. 

Funeral insurance makes a lot of sense when you know that you don’t have enough savings and don’t want your family to take out loans or rely on donations to cover costs. It can also be a useful policy if you’re older and have health conditions, because you don’t need to pass a medical exam to get cover. 

We would also say that funeral insurance makes the most sense if you have extended family responsibilities, because this policy allows you to cover multiple family members. 

The Pros And Cons 

THE PROS	THE CONS
QUICK PAYOUTS: Funeral insurance policies typically pay out within 48 hours of receiving all the required documents.	COSTS OUTWEIGH BENEFITS: While the premiums are low, the long-term cost of funeral insurance can add up over time, making the overall fees more than the payout.
AFFORDABLE: From as little as R50 per month, you can get sufficient cover, which makes it an attractive option for many South Africans.	LIMITED COVER: Funeral insurance only provides for the costs associated with a funeral and not for ongoing expenses like paying off debts or supporting dependents.
EXTENDED FAMILY COVER: You could add extended family members for a small additional fee, including parents, in-laws, and even domestic workers.	NO REFUNDS: If you miss a few payments, your policy could lapse, and you risk losing all the money you’ve paid in.
NO MEDICALS: Usually, medical tests or underwriting isn’t a requirement, making it accessible to people with pre-existing medical conditions or older individuals.	ERODED VALUE: Funeral costs can rise rapidly, meaning that a policy taken out today might not fully cover expenses in 10 or 20 years.
MORE BENEFITS: Some funeral policies offer extras like grocery benefits, airtime, or memorial benefits, which can ease the financial burden even further.	TOO MUCH COVER: Some people end up paying for multiple funeral policies without realising it, which can waste money and complicate the claims process for your family.

Are There Alternatives? 

Let’s say that you’ve looked over the pros and cons and the cons make a lot of sense for whatever reason. It could be that you already have life insurance that includes a funeral benefit so it wouldn’t make sense to have another policy covering your funeral costs. Possibly, you’re young and healthy, and have time to invest your money in order to yield better returns. You might also not be in a financially stable position and are concerned about what could happen if you miss a few payments. 

Ultimately, you may just be interested in finding out if there are other choices available to you. The good news is that there are alternative options to funeral insurance. 

These alternatives include: 

1. Life Insurance With An Accelerated Benefit  

Some life insurance policies offer an accelerated benefit, enabling your family to pay for the funeral expenses from an immediate payout. This way, you get both funeral cover and long-term financial protection in one policy. 

2. Funeral Savings Account  

You could set up a separate savings account dedicated to funeral costs, allowing you to retain control of the money and avoid losing cover if premiums are missed. 

3. Employer-Provided Funeral Cover 

Many South African employers offer group funeral cover as part of employee benefits. Check with your employer if you’re already covered before taking out an additional policy. 

Feeling Informed? 

Funeral insurance can be a valuable financial tool for South Africans who want the peace of mind that comes from knowing funeral expenses will be covered quickly. However, it’s essential to weigh the long-term costs and consider alternatives. In fact, a mix of life insurance for broader protection and a small funeral policy for immediate needs might be the ideal solution. 

We trust that this information will help you make a decision that aligns with your financial goals. For more insights on insurance and financial planning, explore our other articles on AA Inform.