Leaving a legacy
Pretty much everything in life comes at a cost. Passing away is no exception – and the costs involved in a funeral can be pocket-breaking for the family, already dealing with bereavement. If the death is accidental, add the shock of an unexpected loss.
“Funerals are expensive, whether simple or elaborate, encompassing casket to tombstone and memorial service-related expenses,” says Liesl Viljoen, head of marketing for Alllife insurance. “No one would want their grieving loved ones to be faced with the burden of little or no resources to cover the cost of a funeral.
“You can either take out funeral cover, or budget what you think your funeral may cost and set that money aside, reviewing it periodically to keep up with inflation. Planning now will make a significant difference in the event of your passing or being too ill to speak for yourself.”
“A funeral is also a celebration of life,” says Greg Smith, joint CEO of Onespark insurance. “Funerals can be extremely extravagant affairs and without cover, the financial burden falls straight onto the family. Funeral cover and effective financial planning should protect loved ones from having to dig deep when a family member passes on.”
A knowledgeable, trustworthy and diligent financial planner should be at the core of securing a future able to withstand life’s knocks. A financial planner should be maintaining regular contact and advising of changes that can be effected at different life stages, creating value.
“Personal financial planning is critical in ensuring money is spent wisely,” says Telkom’s Sibusiso Ngwenya, managing executive, financial services. “Disposable income should meet current and future needs and unexpected expenditure. Funeral cover is a building block for addressing the financial risks that arise through a death.”
Whole of life
“Financial planning and insurance cover is about the legacy you want to leave behind,” says independent broker, Brad Austen, CEO of Misure. “When searching for funeral cover, it’s important to choose the correct cover amounts. The average pine box cremation costs range between R10 000.00 to R14 500.00 and from there, service, flowers, arrangements, transport and catering are just a few examples of added costs.
“Be mindful also of the maximum entry age and if there is an expiry age for benefits. Ideally you want a product that covers you for ‘whole of life’ – cover that protects you until the day you die.
“While one funeral product might look like the next, it’s the service you receive when you make a claim or a change that matters most. Pay careful attention to waiting periods and exclusions that may lead to your claim being rejected,” says Irvana Singh, head of Customer Experience Management, Absa Life Insurance.
“Begin by assessing your current situation, determine who you need to cover and obtain an idea of the costs for the funeral you have in mind,” continues Ngwenya. “Then ascertain how much disposable income you have left after paying all your monthly financial commitments before deciding how much you are willing to spend on funeral cover. Search for cover that meets your needs and budget and compare cover on a like-for-like basis.”
Underlining the importance of insurer solvency, Ngwenya says cover should be taken from a reputable company registered with the Financial Sector Conduct Authority (FSCA). “Ask the critical question: Is this company in a financial position to pay my claim – even in the situation where many other people claim, as was the case with Covid-19.”
Policy duplication
While an insurance act introduced in 2018 by the Financial Services Board (FSB) placed a cap on the maximum benefit from a funeral cover plan at R100 000 per insured, there are creative ways of overcoming this. However, be very careful of brokers trying to sell you additional funeral cover policies if the maximum allowed has already been purchased.
“We are seeing people overcoming the R100 000 limit through taking out life cover with higher values or investing in an interest-bearing vehicle such as a tax free savings account,” continues Austen. “Consider, however, the time frame for the availability of such money as for a funeral there is an obvious need for an efficient pay-out.
“There are clients with five or six different portfolios to overcome the R100 000 limit,” says Smith, “but it boils down to whether the client can maintain payments. Brokers need to be responsible as unpaid debit orders incur bank charges.”
“Check with the family first if you are going to secure cover for extended family mem
bers as collectively you may have covered grandpa or grandma many times over,” cautions Ngwenya.
“Reviewing all your beneficiaries at various intervals is also essential because despite any beneficiaries named in your will, it is those named in your insurance policies who will receive the funds,” says Viljoen. “Review and update all your policies whenever a major life-changing event takes place.”
“Most funeral policies do not require medicals and acceptance is guaranteed, however, this usually comes with waiting periods, normally six months on natural death,” says Austen. “If the insured passes away from a natural cause such as a heart attack within the first six months there will be no claim payment.”
“There are no real pitfalls if the company is a trusted one and your payments are maintained,” says Smith, “but there needs to be awareness of when and how to claim.”
“Surpassing the waiting periods, funeral cover claims are normally paid out efficiently and timeously, subject to all the correct documentation being submitted,” adds Austen. “However, where a client may have an existing ailment or disease, they may not be accepted for comprehensive life cover with a funeral cover component and could be uninsurable.”
Keeping up cover
South Africa’s lagging economy is pressing consumer budgets very hard. Smith’s advice is that funeral cover is important and a better option is to reduce rather than cancel cover to save on premiums.
“Speak to your insurer when difficult times hit to explore options that will ensure at least some cover in place and review at a later stage when finances are more stable,” stresses Viljoen. “Check all your policies on an annual basis to ensure they remain sufficient, relevant, up-to-date and accurate.”
“Personal financial planning is the starting point,” says Ngwenya. “If your income takes a knock for whatever reason, review your financial affairs to see where you can cut costs, starting with non-essentials such as entertainment. “If, after this, you still cannot afford the cover, look to lowering cover on extended family members or removing them. Avoid lapsing the policy as given the reduced income you now need it more than ever.”
“If you stop paying premiums and start a new policy later on, there is a new six-month waiting period and premiums may be higher. Before letting a policy go, ask if your insurer can give you a premium holiday so that you can keep your policy active,” says Singh.
Making a claim
Making a claim can feel like a formidable task – especially when emotionally impacted, but this can be alleviated if policy holders discuss the cover that they have, making loved ones aware of the claims requirements and where to find the right details.
“A claim payment is subject to the turnaround times on the completion of the claim forms and the supporting documents required,” says Austen. “The sooner the claim is reported to the insurer, the quicker the payouts on valid claims – usually within 48 hours and sometimes sooner.
“Keep a legacy file readily accessible,” advises Viljoen. “Whether hardcopy or electronic, keep your policy information, will, banking details and other important documentation together in one place. Include all your online accounts’ passwords then ensure a trusted family member or friend knows where to find everything.”
Any discussion of funeral cover would be incomplete without mentioning estate cover, which covers the costs of winding up a deceased estate. At the time of passing there are fees that people are rarely aware of, such as costs for the master of the court, advertising and executor fees.
“Estate planning should indemnify your family and heirs in the event of your death,” says Smith. “This is where a financial planner can be invaluable, evaluating the estate’s liquidity and helping families avoid having to sell precious assets.”