Decide what you want and shop around

The first thing Yolande needs to decide is what type of funeral she wants to have. This helps in considering what the appropriate options and financial arrangements might be.

Funeral directors are often criticised for charging high costs. However, these costs relate directly to the contract written with the deceased’s next of kin. At this time, the consumer of the funeral “product” is usually vulnerable and shopping around isn’t an option. So my first piece of advice would be, once the type of funeral is chosen, to shop around! Prices vary dramatically between operators for the same service.

The two main products on the market (unless you do it yourself) are a direct committal or a full-service funeral.

A direct committal is just that: the service provider picks up the body and disposes of it directly (usually via cremation). No service or flowers etc are provided. So you are paying for transport and disposal only. Around Sydney currently you can access this type of service for less than $2000.

A full-service funeral ranges from as little as $4000 (depending on the extras you buy) to anything up to $20,000 or more. And that doesn’t include the burial site or memorial “place”, such as a plaque. The average basic funeral in NSW currently costs about $5000.

However, this is all a different question from that of financial arrangements for a funeral. The person who signs the contract with the funeral provider is legally responsible for payment.

Funeral insurance is just low-value life insurance. The benefit does not usually need to be spent on a funeral. With funeral insurance, and at age 50, you are likely to spend a lot more on premiums than the cost of a funeral – probably many thousands of dollars more than the funeral if you live to the average life expectancy. While new, more consumer-friendly products have appeared on the market recently, funeral insurance generally is not a great product in terms of value for money.

There is more certainty with pre-paid (pre-need) funerals. You have more control over the product you are buying, and government controls over the management of these funds provide certainty for consumers. Many funeral directors offer instalment options for pre-paid funerals, including direct committals.

In terms of superannuation or life insurance payouts, you will find that funeral directors do not submit their invoice until after the death certificate has been issued. Usually the funeral director supplies a death certificate as part of their service. Additionally, at this point many funeral directors will allow the family to pay for the funeral by instalments. Delaying the full payment with a small deposit until superannuation and life insurance can be accessed is also possible.

Finally, a savings or term deposit account for the express purpose of a funeral is always possible, and other more complex financial products such as funeral bonds are also available.