South Africans really like buying funeral cover!
Many South Africans are funeral insurance policyholders, making it the fastest-growing insurance product in the country.
You only need to type “funeral cover” into your Google browser to see how insurers are clambering all over each other to vie for your internet search traffic results.
With so many funeral policies being sold, could you end up having too many funeral policies?
At what point should you stop buying funeral cover and consider a life insurance policy?
Before we answer those two questions, we need to ask ourselves a more important question – Why is funeral insurance so popular in South Africa?
We think these are the reasons:
- It’s really easy to take out funeral cover.
- Funeral cover pays out within 24-hours of a valid claim.
- You don’t need to disclose any medical information.
A dignified burial is important to us (and we are referring to South Africans as a collective here). Making sure we leave our loved ones with enough money to provide us with a decent send-off is obviously a real concern, clearly represented by the rate at which we are snapping up policies.
Couple that with the fact that it’s super-easy to take out a funeral plan over the phone (it might take 20-minutes to complete to get you covered), it’s really easy to understand why people buy funeral plans.
And then there is the real bonus of not having to answer any medical questions or have a blood test completed.
Funeral cover is popular, and it serves an obvious purpose.
But it can also be oversold! In many cases, it might not be the right product for the consumer.
Did you know that you can only have 1 funeral policy per insurer, but you can have as many funeral policies as you like in total?
There is nothing stopping you from taking out 10 funeral policies with 10 different insurers.
Well, there is one thing stopping you and that is affordability.
Life Cover is the cheapest way to finance your passing!
When considering taking out a funeral policy, you should be asking yourself this question – “If I pass away, how much money do I need to leave behind and for what reasons?”
If, hand-on-heart, the answer to that question is – “My family only needs money to cover my funeral expenses” – then you need a funeral plan.
If your answer sounds a bit like this – “I need my family to be able to settle my debts, cover my funeral expenses, and I need to leave enough money to provide an income for my family” – then you don’t need funeral cover, you need life cover.
The thing is most people who want to avoid a few medical questions and believe that life cover never pays out, end up buying a stack of funeral policies that cost them a fortune.
If they had life cover for the same insured amount, they would be saving a fortune in premiums every month.
Let’s look at a quick example to better illustrate the point we are trying to make:
Anele is a 41-year old male who has 4 funeral cover policies with 4 different insurance companies. Each policy has a sum insured of R100 000 which means that Anele has a total of R400 000 cover in place. If he passes away, his beneficiaries will stand to inherit R400 000.
How much could all this funeral cover be costing Anele each month?
We figure about R300 per R100K in cover. That could mean that Anele is spending R1 200 a month for R400 000 funeral cover.
How much life cover could Anele get for R1 200 a month?
Let’s assume he doesn’t smoke, has a 3-year diploma and earns R20 000 per month.
Anele could qualify for R4 800 000 life cover. That is 12 times more cover than his funeral polices, for the same premium spend each month.
So, what’s the catch?
There isn’t one.
In order to qualify for an amount of cover like that, Anele will probably need to have a negative HIV test completed, but that’s a small price to pay for R4 800 000.
If Anele only needs R400 000 cover, then we can reverse the calculation.
That should cost him R190 per month in terms of life cover which means Anele could be saving R1000 a month.
Imagine what he could do with an extra R1000 per month?
This is the takeaway from this article.
- You need one funeral policy if all you need to do is leave your family with enough money to bury you.
- You need life cover if you need to leave money to settle debts, provide an income and cover funeral expenses.
Too many funeral plans? Get a life insurance quote and work out how much you could be saving every month.
Until next time.
The Wise About Life Team