Deadly truth about funeral insurance
Recently a story has run on ABC and in other news media about a woman who paid fortnightly into a funeral fund, but when her 18-year-old son committed suicide was not paid sufficient money to cover the cost of his funeral. Not only is this story in itself disturbing to say the least, the really big scandal is how funeral insurance which is far inferior to life insurance, is so widely promoted.
Funeral insurance pays when you pass away, life insurance does exactly the same but good policies also pay when you have a terminal illness with less than a year or two to live. The argument that funeral cover pays more quickly than life cover is rarely true. Insurance companies usually very quickly pay a sum for funeral expenses and the balance shortly afterwards.
As a rule, (you always need to check the fine print) funeral insurance does not pay for death in the first year whilst life insurance does with exception of suicide where life insurance does not pay if the insured commits suicide within 13 months of taking out the policy but does after that. The killer issue is that funeral insurance typically costs about 10 times as much as life insurance. It is absolutely preposterous and I can only describe it as greedy and nasty when an online insurance company that sells both funeral insurance and life insurance recommends funeral insurance to somebody who is eligible for life insurance. Funeral insurance may have its place for those who are too ill to qualify for life insurance but you can now get life insurance until age 99 so I would only consider funeral insurance if a life insurance company refuses any cover or applies a prohibitive loading - hence funeral cover might be a good idea for professional boxers.