Funeral insurance is one of the simplest forms of insurance on the market in South Africa, yet it is possible to mess it up badly. And at a traumatic time like the death of a loved one, the fewer the surprises the better. Paul Myeza, Chief Operating Officer of OUTsurance Life with 23 years’ experience in insurance recently launched OUTsurance’s own flexible funeral product. He explains what to watch out for.
You can buy funeral insurance from just about anywhere – your church, stokvel, from undertakers, burial societies, banks and retailers. Make sure that the company that underwrites these policies is reputable. “Buying funeral insurance is something you will use at some distant time in the future. Make sure that you will get paid out and that you have confidence in the claims processing and payment ability of that company. Are they known for paying claims or do they generally try to avoid paying claims? Insurers will need to make sure that the claim is valid; if so, they should pay.” You can check out the track records of insurers via the Ombudsman’s annual report.
Because of the issues related to migrant labour and those who seek work away from their families, cost of transportation is something to seriously consider. How will the deceased’s body get to the place of burial? Families have found that the cost of transportation is more expensive than what they budgeted for the whole funeral. This is of critical importance in cultures that bury loved ones near family, birthplace or ancestors. Make sure you have a transportation benefit if it might be necessary.
Some funeral insurance offers you a funeral service and not a lump sum payout. This can be a good idea, but you need to understand what you are buying. What happens if that undertaker is no longer around when you need the service? How do you know that they will give you the R50 000 service that they promised you? If you opt for a funeral service you need to look carefully at their service levels, reputation and whether they seem likely to still be around in a few years.
South Africans take out on average between three and four funeral policies in their lifetime. There are two reasons for this. If someone can no longer keep up the payments, they let the policy lapse and then need to buy a new one which will have a waiting period. It is better to find out if your funeral cover allows you to put your policy on hold until you can afford it again.
Alternatively, someone may have bought a policy years ago and then realises that funerals are now more expensive, so they then buy a second policy to ensure there is enough to pay for the funeral. Rather try to buy a policy which can be adjusted up or down as your circumstances change and which can take into account inflation.
Some South Africans buy funeral cover but what they actually want is life cover. Life cover can be cheaper to buy so make sure you are buying what you need. Sometimes people buy a number of funeral policies thinking that this will leave their family more money on death, but this can backfire. Insurers may not pay if they believe you were over-insured for a funeral!
Often a salesperson may want you to take out additional cover - some of which you may need and some of which they want you to have so that they get a better commission. Beware of buying unnecessary benefits. You may also be offered money back if you don’t claim after a certain time. The truth is that you will pay for that sort of benefit through an increased monthly premium. Find out if all the benefits come standard with the policy or whether you can pick and choose the benefits you actually want and need. It will be cheaper for you.
The most important feature is flexibility. Ask the following:
- Can you increase or decrease cover as your circumstances change with no penalties?
- Do you get any premium holidays?
- Can you pause cover at any time when you can’t afford it without cancelling your policy?
- Can you use technology to quickly and easily get a quote and buy cover?
- Can you pick and choose additional benefits like transport, tombstone, catering, after tears event and marquee?
- Who is covered under a single policy?