While funeral expenses are often top of mind due to the fact that they are both immediate and costly, there is often also a need for further financial support after the funeral is over and you begin to return to everyday life. So what’s the difference between funeral and life cover? Here are the key things that you need to know about both.
What is funeral cover?
- Funeral cover pays out immediately after the policyholder or life assured passes away
- It is designed to cover funeral expenses such as the memorial service, casket, tombstone and so on
- Funeral cover premiums are generally quite expensive because a) the payout is fast and b) standalone funeral cover is often not underwritten
- The lack of underwriting means that normally you only need a death certificate to claim
- Generally, funeral cover is for smaller amounts of money (e.g. R30 000 instead of R300 000).
- It is best to make sure that the payout is given to person who will be responsible for making financial decisions regarding your funeral
What is life cover?
- Life cover pays out once the estate is taken care of, and the money is then given to a beneficiary (or multiple beneficiaries) that you choose
- Unlike funeral cover, life insurance is designed to take care of any outstanding debt that you might have and replace your income in the event that you pass away.
- Life cover is like a financial net to ensure that if you pass away, your loved ones can continue with the kind of lifestyle they enjoyed while you were alive
- Life cover is generally for larger amounts (in some cases, many millions) as it is designed to support dependents after the death of a provider.
What should I consider?
- Funeral cover is important to ensure that you (or your loved ones) get a dignified send off and that those left behind don’t run into debt in order to afford a proper funeral. However, it’s also important to think about what will happen to your family in the longer term if you were to pass away.
- Think about how much debt you have and whether anyone depends on you financially and would be negatively affected if you died. If the answer is yes, then you need life cover and not just funeral cover
- Strongly consider drafting a Will alongside your life cover to make sure that the money is used as you intended.
- Remember, MiWayLife offers a combined life and funeral policy, so you a portion of your insurance can be used to cover yourself and family members for funeral cover (with an immediate payout) with the remainder used as traditional life insurance to provide a financial safety net for your loved ones. This means that your premiums will generally be cheaper overall, and there is much less admin for your dependents to deal with should you pass away.