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Should I have Funeral Insurance or a Pre-paid Funeral Plan?

Funeral insurance or "final expenses" insurance is a life insurance policy with a small cover amount, such as $5,000 to $25,000, that you may buy directly from and Insurer like Pinnacle Life. You can name any beneficiary, typically a family member, who would make the claim and receive the money upon your death. That beneficiary would then be responsible for using the money to carry out your wishes.

The beneficiary legally could decide to use the money any way they want, so make sure you trust your beneficiary. Also, if your cover amount exceeds the cost of your funeral, the beneficiary keeps the difference.

Another type of life funeral insurance is called pre-paid insurance. It is intended for the person who has selected specific arrangements at a funeral home and wants the assurance that those arrangements will be paid for and implemented.

Unlike funeral insurance policies, which you buy directly from an insurance company, pre-paid policies are sold by funeral home directors. The funeral home is the beneficiary of the policy and the funeral director receives a commission, for selling you the policy. The Funeral Directors Association of NZ website has some good information about pre-paid funeral plans.

Unfortunately, unlike funeral insurance, there are no websites which allows one to comparison shop for pre-paid funerals, so you'll have to phone around to compare prices and policy terms.

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Funeral Insurance pays cash to pay for your funeral so when the time comes your family will have one thing less to worry about.

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