Richard Laycock | Insurance expert
Funerals are a common element of modern day life, but they’re an event that is often dreaded by most people. And fair enough. The idea of planning a funeral can be completely daunting. However, there are plenty of reasons why you should get the ball rolling sooner rather than later. For starters, if something unexpected arises, you could end up leaving your family to plan and pay for your funeral all on their own. You also want to ensure that all your preferences are taken into consideration.
Funerals are expensive, though. If you want plan your funeral in advance, you’ll find that there are a few different ways that you can pay for it. So what’s the difference between a funeral plan and funeral insurance?
The basic definitions
For starters, a funeral plan is prepaid. You can essentially pay off your funeral in advance at a locked-in cost. That means you won’t face interest charges or raised prices later on – the amount you pay is capped and the inclusions are very clear. It also means you can lay out the specifics of what you want for your own funeral.
Insurance on the other hand requires that you pay annual premiums in order to insure a benefit amount for your funeral. That amount is then later used to pay for your funeral expenses. The benefit can typically be as much as $30,000, which is paid out when you pass away.
Funeral plans are good because they have a capped limit. The amount you pay off is limited to the agreed price, so you’re never overcharged and it doesn’t just continue to increase until you pass away. You also have control over your ceremony and the sorts of things you’d like included, so there is more transparency. Typically, a funeral plan will cost you less than a funeral insurance policy.
Funeral insurance also has its benefits. For starters, it’s tax-free, so when the payout is transferred to your family they won’t need to pay tax on it. The payout process is also relatively quick. Funds are typically received by family members within 24 hours. Finally, you can also get accident cover included, which means that you may actually be paid out more if your death was caused by an accident.
The downside of a funeral plan is that the benefit isn’t adjusted to suit inflation – there’s no price indexing. Payouts are also typically counted as taxable income, so your relatives will have to pay tax on them. There are also no refunds – once you’ve put money towards a funeral plan you can’t get it back.
There are also downsides to funeral insurance. Firstly, the total cost of it is unpredictable. You might be unable to keep up with payments if circumstances change. There are also tax implications that can affect your pension, and typically, funeral insurance has a high total cost compared to a funeral plan.
Whether you look into getting a funeral plan or funeral insurance, at the end of the day, the important thing is that you do think about planning your funeral before it’s too late. There are a few ways you can do this. Funeral planning services like eziFunerals can help in making the task must simpler and less daunting. It’s definitely worth considering something like this if you aren’t sure how to get started.
eziFunerals is Australia’s Largest Funeral Marketplace that supports individuals and families plan a funeral and compare funeral homes online. Founded by consumers frustrated by how difficult it was to get independent information, eziFunerals supports consumers to plan a funeral, compare funeral homes on service and price and select the right funeral director anywhere, anytime. We are an independent, Australian-owned and operated company, and are not a subsidiary of any other corporation. We are not part of any other funeral company.