Funeral Cover vs Life Insurance: What’s The Difference?
Yes, you need a plan to protect your loved ones from the financial burdens that they’ll face after your passing, but why should you have to decide between funeral cover and life insurance? Aren’t they the same thing? And do you actually need one or both of these types of insurance at all? These are important decisions to make, and none them should be made without first knowing the facts.
Differences Between Funeral Cover And Life Insurance
Depending on which option you choose, the consequences of the unwelcome event of your death can play out one of two ways. Your funeral cover policy could be paid out as a single lump sum to your family with the intended purpose of covering the cost of your funeral. Alternatively, if you have taken out a life insurance policy, that policy will be paid out to your beneficiaries according to the purposes set out in your will, which could instruct how much of the pay-out should go toward paying off any debts you leave behind, paying for your funeral, or providing financial support for your family’s day-to-day needs like rent and school fees for a few months following your death.
But that’s only what your insurance policy offers you on the day of the pay-out. What do the differences between funeral cover and life insurance mean for you now?
- Both pay out upon your passing, but funeral cover is more expensive because it pays out more quickly.
- Funeral cover pays out with very little paperwork or questions asked. This is why many insurers can afford to claim that they’ll pay out your claim within 24 hours. Standard life cover, on the other hand, requires a much longer claims process, involving you to complete claim forms and provide medical reports.
- Funeral cover policies will cover you for a smaller amount than your average life insurance policy.
- Funeral insurance can cover you and several members of your family, while standard life cover will only cover one person as well as their spouse.
What You Should Know About Funeral Cover
Your average funeral insurance should cover the basic costs of a funeral, burial or cremation. However, there are a number of insurance providers, who also offer airtime as part of their policies to assist claimants as they make those all-important calls to funeral homes, florists, caterers, etc.
On the subject on who a funeral policy pays out to, it’s best to entrust the specifics of your funeral policy to a person, who can manage the financial aspects of your funeral. With some policies, you have the option to nominate this person to be the beneficiary of your funeral cover lump sum, which would be paid out to them directly. The person you choose to trust with this responsibility must be financially responsible themselves and will use this money to carry out your wishes regarding the details of your funeral.
Funeral cover is available at funeral homes, specialised insurance providers, or can be taken out as an extra benefit on a life insurance policy. Alternatively, funeral cover may also be offered as part your employee benefits, so query this option with your boss. With funeral cover, you are not restricted to only one policy; you can take out as many policies as you can afford to cover your parents, your children, or members of your extended family.
What You Should Know About Life Insurance
Life cover can be very affordable, provided you maintain a healthy lifestyle. In some cases, you will be required to undergo some general medical tests when applying for life cover. By taking these medical tests during the application stage, you save yourself and your family a lot of trouble in the future as there would be fewer questions asked when claiming from your life insurance policy. However, there are other factors that come into play when calculating the cost of your life cover premiums, such as your age, gender and occupation as well as your hobbies and habits (e.g. smoking).
A vitally important part of your life insurance policy is your will. On the one hand, a will can help to better establish your beneficiaries and establishes better financial protections for your family. Unless you appoint a beneficiary in your life insurance policy, the life cover amount will be paid to the person nominated in your will. By working alongside a reliable financial advisor, you can also determine the right amount of life cover to take out by way of an estate analysis. Alternatively, a reputable insurance company can offer similar service to that of a financial advisor. Where there’s a will, there’s a way to make life insurance easier on your wallet.
So, What Is The Right Choice For You?
Ideally, you should consider getting both of these insurance options. Despite the misconception that these life insurance and funeral cover are one and the same, the truth is that they are far from interchangeable.
The loss of a loved one is devastating, and the immediate grieving process is only made more painful by the financial strain due to the cost of planning a funeral. This is what makes funeral cover essential.
However, life carries on after this loss, and a family can struggle to make ends meet without the deceased. Maybe there are debts of the deceased that still need to be paid, but there are also other financial needs like school fees, rent or home loan payments, water and electricity, or further education. This is where life insurance comes in, ensuring your family can thrive in the long-term.
Make the right decision when it comes to insurance – both, for your loved ones and for your own peace of mind.