For many South Africans, funeral cover is the first financial product they invest in after opening a bank account. South Africans have a lack of knowledge around funeral policies.
These are the questions you need to ask:
Who are you likely to be responsible for?
Yourself: Funeral cover for you and your direct family members will ensure that the cost of your funeral does not put undue financial pressure on your family when you die.
Your parents: Most individuals will also be expected to contribute to the funeral costs of their parents.At the very least, one should have an idea of what financial responsibility you are likely to incur and make provision accordingly.
Extended family: The same would apply for extended family such as uncles and aunts you may be financially responsible for. You need to decide whether it makes sense to have an additional funeral policy for extended family, or whether this can be provided for through an emergency fund.
How much cover do you need?
“The amount of money likely to be spent on a funeral will be determined by the ambitions of the family, so it will vary.
An example,some cultures require the slaughtering of a cow when an elderly family member dies.
“You need to ensure that you have sufficient money to cover that, and the funeral costs and the rituals that take place afterwards.”
In the case of extended family, you may also find that you will be relied upon to provide some financial support after the death of an adult. For example, there may be immediate bills or school fees to pay for. It would be useful to have a contingency plan for these events rather than trying to meet them out of your own budget or credit facilities when the death occurs.
All these factors need to be considered, as well as how these costs will be shared by the family, when taking out a policy.
Rather than just buying more policies, look at reviewing your existing policy and increasing the cover.
Is there a limit to how much cover you can have?
Individual insurance companies do limit the amount of cover provided per life covered in a funeral policy. For example, Avbob Mutual has maximum cover of R50 000 per person,
That does not prevent you from taking out a policy with another insurer if you feel you need more cover. However, this is not necessarily a cost-effective strategy because funeral products are not underwritten, so they limit the benefit amount. There are, however, products that have limited underwriting (medical questions with no testing) that provide higher benefits
Make sure you are covered by a reputable provider
Funeral parlours or burial societies offer products specifically for burial and should be underwritten by a reputable financial institution to guarantee that the claim will be honoured, thereby giving the customer peace of mind.
In some cases, however, these entities do not underwrite with an insurer and rely on payments from members to meet the funeral costs. This is illegal and significantly increases the risk of the claim not being paid out due to the unavailability of funds, especially if there are multiple claims from that particular entity.
“People need to ensure that the funeral parlour is an accredited service provider by asking for the financial services provider number and declaration from the insurer that this funeral parlour is underwritten. All brochures and documents should include the details of the underwriter, and the FSB registration certificate must be visible in the offices.”
Points to remember
A funeral parlour that offers funeral cover must issue a certificate of membership from the underwriting company as confirmation of membership, and this should include details of the benefits and premium amount.
In the case of a burial society, make sure the society has a constitution that declares its terms of operation. As the policyholder, you must be clear on the terms of your contract and honour your obligations