Life Insurance or Funeral Cover: which one better serves the need to protect you and your family?
As well as being the title of a Dorothy Parker poetry collection, a comic book by Frank Miller, a video game, a song by Kid Dynamite and an episode name from countless TV shows, the phrase 'death and taxes' is also a reference to two of life's inescapable inevitabilities: SARS will always come calling and our time in this world will all eventually run out. Sad but true.
Death is hard to think about, and the irony is that the overwhelming experience of COVID-19 and the death of 2.5 million people from the pandemic so far has made it impossible not to have it constantly front of mind. But this is exactly why it's necessary to think about it, and prepare for it. That's basically what life insurance and funeral cover do. Here's how they differ.
"Strictly speaking, funeral cover is part of life insurance. However, this cover is meant to assist in meeting the costs of burying a loved one when the unfortunate happens," says Felix Kagura, head of life insurance propositions at the Standard Bank Group. "As a result, the cover is tailor-made to meet this need and meant to cover more people."
Kagura explains that life insurance, on the other hand, is meant to cover more risks (disability, critical illness, etc.) and is expected to meet all the other responsibilities you need taken care of after your death. "As a consequence, the [cover is] much higher, the risk selection process is more rigorous and, indeed, it tends to cover fewer people per policy," he says.
In short, life insurance is intended to help your family members keep up their standard of living, paying off debts like bonds or covering rental costs and paying for education when their household income is one of the many things diminished by your sudden absence. Funeral cover, as a stand-alone policy, pays the immediate costs of funeral arrangements.
Kagura says that the main advantage of funeral cover is that it requires comparatively lower premiums than life insurance.
"It's also convenient to purchase and doesn't have the complex underwriting requirements. Normal life insurance tends to have underwriting, where the risk cost is based on an individual profile and needs," he says.
Because funeral cover is made to help with urgent and immediate funeral costs, it also tends to be quicker to pay out, and usually makes an almost immediate payment upon death. "Some policies offer other payments to cover tombstones, groceries, airtime, etc.," explains Kagura.
"Life insurance generally pays a lump sum when someone passes away, to help the families with longer-term debt and needs," says Kagura.
Factor in the rising cost of living in SA and you'll soon realise the importance of having cover for the huge expense of education – especially if you have more than one child. The premiums on a life insurance policy are more than worth it when looked at in light of the cost of your loved ones will have to bear if you pass on and they no longer have your income to rely on to help ease the burden of expenses such as paying off a home loan or the cost of rent and essentials, like food and clothes. Life Insurance policies should meet your needs and fit your budget, and it's easy to select the cover you want using the Hippo Life Insurance comparison tool, which allows you to compare offers from some of SA's top insurers.
MiWay Life says that, on average, South Africans spend between R23,500 and R86,000 on funeral costs – excluding the costs of catering, flowers, tombstones and transporting the body. That's a huge burden for anyone to bear unexpectedly – but with a funeral policy in place, most of the costs will be taken care of immediately. Compare quotes for the cover you need with the Hippo Funeral Cover comparison tool.
This article is for informational purposes only and should not be construed as financial, legal or medical advice.