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Australians Wasting Thousands on Poor Value Funeral Insurance

wasting funeral insurance

According to data revealed, Australians are wasting money on funeral insurance with the average Australian funeral could cost consumers an estimated $33,000 more if paid for through a current funeral policy instead of prepaid options.

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The claim by InvoCare, Australia’s largest provider of funeral services, is based on an extensive review of current funeral policies and prepaid options says Michael Hamilton, General Manager Preneed at InvoCare.

“As a comparison, a funeral could cost around $6,500, which a prepaid funeral allows customers to lock in at today’s prices. The same funeral in 2044, (25 years later), is estimated to be over $15,000 due to inflation. Worryingly, having compared over 18 funeral insurance products from eight providers, we found that you would spend approximately $40,000 plus in dividends for the same funeral.

“Funerals and weddings are similar scale events, both requiring the same level of care and attention to detail to ensure that they reflect the family’s wishes and help them to celebrate their loved ones. However, on average, ‘tying the knot’ can take many months to plan and cost around $65,000, while funerals can cost a tenth of the price ($6,500) and are normally planned in about four days.”

The alarming data comes in the wake of draft laws unveiled this month by Treasurer, Josh Frydenberg that are intended to protect vulnerable consumers from unsuitable funeral insurance products. The announcement followed recommendations from the Royal Banking Commission, which called on insurers to overhaul or ditch their products. However, Hamilton questions the ability of funeral insurance to deliver value at all, “We welcome these new draft laws and think that they will help protect consumers from products that don’t make sense. People buy insurance to protect themselves against relatively unlikely events and so payouts are few and far between. Conversely, funerals are a certainty and so any insurance policy has to charge the consumer more than the final cost of the funeral to be profitable, it simply can’t work.” 

Funeral insurance makes up 9% of funeral purchases among those over 55s, the biggest buyers of funerals, with pre-paid accounting for just 4%. Currently those on the West Coast are most savvy with their funeral planning, with pre-paid accounting for 15.7% of purchases in WA, followed by 13.2% in SA. Conversely this figure plummets to just 6.5%4 in NSW, 6.7% in QLD and 11.5% in VIC.

A lack of awareness of funeral options is pushing consumers toward low-value insurance policies adds Hamilton. “Our research shows that a third of people who bought funeral insurance did so because they mistakenly thought it was the cheapest option (36%) and a further one in five (22%) didn’t know any other options existed. Prepaid services allow you to buy your funeral at today’s prices avoiding inflation, hefty premiums and complicated application and claiming processes that are often built into insurance policies.”

While prepaid funerals offer financial benefits, it’s a concern for family that is driving Australians to plan their final goodbye, with 44% doing so to provide peace of mind for their family and over one in ten (14%) doing so to make the process easier when they are gone.

“Funerals can challenge families, especially when members have differing views on how to remember their loved one, or are waiting for insurance payouts and inheritances to pay for it. People are choosing to prepay and record their wishes as a final act of kindness so that their families can concentrate on supporting each other,” adds Hamilton.

Today, funerals have become a celebration of life and a moment to show gratitude for the departed with 77% of over 55 year olds agreeing that these occasions should be less ‘stiff affairs’ and more in line with the lives that we live. 

A funeral is about honouring a person and their personality adds Hamilton: “Our industry is tasked with providing a final connection between the departed and their loved ones. Prepaid funerals allow you to focus your money on saying goodbye in your own unique way and nothing else.”

For more information on prepaid funerals and calculate how much you could save on funeral insurance, visit: www.guardianplan.com.au/prepay-a-funeral