THE DIFFERENCE BETWEEN LIFE INSURANCE AND FUNERAL COVER

When speaking of the topic of insurance, the discussions surrounding life insurance and funeral cover are often used interchangeably. However, this may often cause unfortunate implications when the time comes to claim. Each policy has its own unique sets of benefits, and comparable many financial products and services, these should be invested in based on your specific needs and priorities.

Firstly, it is important to note that both life insurance and funeral cover are risk mitigation plans. Essentially, they are plans to ensure financial security in the event of death. How they mitigate risk and the extent to which they do so is where the difference lies. Life insurance ensures the long- term financial security of dependents. Often, your concern here is the provision of the continued life of your dependents after your death, especially for those that may not have the capacity to financially fend for themselves. Funeral cover, on the other hand generally pays out quicker. The objective of this, as implied in its name, is to cover all expenses of the funeral and ensure a dignified send- off. Generally, in Botswana, funeral cover claims can be paid out within 24 hours. Life insurance, on the other hand, while insurers aim to pay out as quickly as possible, takes longer to do so than the former.

Consequently, the process of taking out a funeral policy is not as involved, meaning that it is just a matter of ensuring that one is of an insurable age and will be able to pay premiums. There is a general waiting period of 6 months to able to take out this policy. With life insurance however, the insurer will often do a forensic investigation of your life. This often includes medical underwriting as well as the assessment of other factors in your life, for instance your line of work, general lifestyle, and income. This is to determine the amount of risk the insurer is taking on.

The greatest benefit of life insurance is that it allows you take out other ancillary benefits. Funeral cover does not do that. The risks that insurers try to mitigate in life are not only death, but also disability. This possibility needs to be accounted for as it may impose upon one’s ability to be able to provide for themselves and their loved ones. Within Botswana Life, capital disability benefits, hospital cash benefits, and dread disease benefits allow for one to sustain an income if you are not able to continue to work due to disability or critical illness. Funeral cover simply covers the cost of the policyholder’s death or that of their loved ones. However, if one has pressing concerns about the costs of a funeral on their loved ones, then it is advisable to consider a Funeral cover policy.

However, before choosing to invest in either policy, the Financial Needs Analysis process must be carried out. This process is about creating a model to map out what your current financial situation is. It considers your income, debts and financial priorities among many factors. Using this model, the insurer can determine what policy and benefits may be suitable for you, and from there your chosen insurance provider will be able to make an informed recommendation. Financial Needs Analysis is a complementary service offered by insurance providers.

During this process, it is important to ask a qualified broker detailed questions when discussing life and funeral cover options. Among these questions one needs to enquire on the detail of how disability is defined within your policy, as this is often a point of contention. It is imperative therefore that one goes deep into trying to understand what exactly this means.

When one decides to invest in risk cover, it is important to understand that this policy is meant to be there to act as peace of mind, rather than a financial investment policy that gives you back all your premiums at the end of the insurance term. Due to this misconception however, Botswana Life has designed cash- back benefits into some policies. Meaning that, after a certain amount of time, if you have not claimed, you may get a certain percentage of your premiums paid back to you. Once more, these are discussions to have with a broker

While many begin discussions about investing in these risk mitigation plans at an older age, it is often more beneficial to many to begin at a younger age. While we may be aware that death will happen, we just do not know when it will happen. Therefore, the minute you earn an income it is beneficial to consider taking out a policy. Within this age group, insurance tends to be more cost effective.

Generally, in insurance, the older you are, the more expensive your premiums become. In many cases, when people get deferred from receiving life insurance, it is due to their age. Age, however, does not impact deferment as much within funeral cover, however there are rates that are age dependent. The older you are, the higher that these tend to be. Within Botswana Life the Mosako Funeral Plan can be taken despite your age. Depending on how the product is designed by any provider, there can be limitations due to age.

While both covers are critical and can be beneficial to you depending on your needs, it is important to note that insurance is not just about covering against the risk of disability or death. It is about leaving a legacy that lives beyond your lifetime, and it is about strengthening your financial foundation against any turbulences that may come your way.