Funeral insurance is enormously popular in South Africa. Over 18 million South African adults have funeral policies (more than half the population). But what if many of these South Africans could get a better deal? What if there was a cheaper and more effective alternative to funeral cover?
Too many South Africans are missing out on the benefits of Life Insurance.
How does Life Insurance differ from Funeral Cover?
Taking out a life insurance policy tends to require a little more admin than funeral insurance, such as answering a few basic medical questions.
The process allows insurers to price premiums more accurately, which will often result in a fairer deal for the consumer. The medical assessment also protects beneficiaries, as there is less chance of a claim being refused.
On the other hand, you can buy funeral cover much more quickly without many questions. So why go through the extra hassle?
Actually, there’s a very good reason to undergo a health assessment. The common perception is that health screening simply exists to protect the insurance companies. But the protection works both ways. By disclosing any pre-existing conditions, you are protecting yourself from facing a rejected claim. For example, if you have already disclosed that you are living with diabetes, the insurance company cannot deny a claim on the basis that it is linked to a pre-existing diabetic condition.
When it comes to funeral policies, insurers protect themselves with long waiting periods from the time that you take out your policy to the time you are eligible to claim.
As Bani Schmidt from Different Life explains, “consumers need to pay careful attention to waiting periods on funeral insurance, particularly in the case of death by natural causes”.
Waiting periods on funeral policies are averaging as much as six months on an industry wide basis. As Bani points out, that can have serious consequences for beneficiaries. “The whole point of funeral insurance is to provide a cash payout upon death. Now imagine a situation in which a person takes out a funeral insurance policy and then dies of a heart attack three months later. The funeral policy may not pay out. That really shouldn’t happen with a life insurance policy.”
Buy cheap, buy twice
Just as the one-size-fits-all approach to funeral insurance means you are subject to a long waiting period no matter your personal circumstances, funeral cover premiums are priced at the maximum meaning you may not be getting a fair deal.
Life insurance policies tend to be more personalised and the premium costs vary depending on your unique circumstance. For example, women often pay lower premiums, owing to a lower risk profile. Non-smokers pay less than smokers. If you work in a comfortable office rather than as skydiving instructor, you’re likely to pay less as well.
Because life insurance policies take a detailed look at the individual, these policies are more likely to offer better value, offering more protection at a fairer price.
Suppose you want R200 000 worth of cover. In many cases, you would need multiple funeral insurance policies because funeral insurance tends to be capped. A leading funeral insurance provider offers a maximum of R75 000 worth of cover to a 35 year old for about R214 per month, according to an online quote on its website. So multiple policies to get to R200 000 worth of funeral cover will add up to at least R614 per month.
Compare this to the cost of R200 000 worth of life cover. Different Life is a life insurer that endevours to make life insurance simple, inexpensive, effective. Using Different life free, no obligation online quote engine, a 35 year old male non-smoker would only pay R79 premium for the same amount of cover. That’s almost 90% less per month. Its cheaper than a single funeral policy that offers less than half the benefit.
The financial benefits of life insurance become even more obvious when you see the huge increase in payouts you would get for the same monthly premiums you are currently paying on funeral. For R210 per month you can get R1 000 000 paid out to your family on your passing from Different Life. This is over 13 times more than the R75 000 your family would receive from the funeral insurance provider for the same monthly premium.
Take out a life insurance policy now
If you die, the real cost to your loved ones is more than the money required to pay for the funeral. The loss of a breadwinner will have long-lasting consequences, leaving your loved ones economically insecure, even facing debt.
Funeral insurance is useful for smaller and quick payouts – it protects dependents from incurring debt to meet funeral expenses – but the payout will likely not be near enough to protect them in the longer term.
Life insurance policies can be a much more effective way to secure your loved one’s futures. With just one life insurance policy, you can get as much cover as you need, at terms that work for you, for a fairer price.