Senior Funeral Insurance – What You Need to Know

As you get older, you start to focus more on what matters most, your family. More specifically, ensuring your family will not be left with the financial burden of paying for your outstanding debt or funeral.

Get peace of mind by planning ahead. This article will help you understand what seniors need to consider when comparing option to fund their funeral costs. We’ll look at your options based on your age, your financial situation and your health.

Senior funeral insurance will help ensure your family is able to give you a dignified farewell. With a lump sum pay out of up to $15,000, your beneficiaries can cover your final expenses. There are a variety of funeral cover options for pensioners to choose from. However, capped funeral insurance is far better than the older style none capped policies.

Funeral insurance for pensioners

Funeral insurance for pensioners needs to be affordable for the long term, as income from the age pension or other pensions generally don’t increase as you get older. Therefore, pensioners should consider funeral insurance policies with level premiums that are capped, ensuring you don’t pay more in premiums than the policy pay-out.

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What you need to know about funeral cover for senior citizens

Funeral cover for seniors come in many forms, including Funeral Insurance, Prepaid Funerals, Funeral Bonds, Savings, remnants of your Superannuation or leaving it up to your family to cover the costs. Either way, the earlier you start preparing, the more options you’ll have because funeral insurance is usually only available to people under the age of 70.

General Age Eligibility for the different options

Entry age for eligibility Funeral Insurance Life Insurance Funeral Bonds Pre-paid funerals
50 to 59
60 to 69
70 to 75
(Depending on insurer)
76 to 79
(Depending on insurer)
80 years or older

The Pros and Cons of each option

Benefits Funeral Insurance Life Insurance Funeral Bonds Pre-paid funerals
Quick payouts
(Funeral Advancement Portion only)
Easy to buy.
Premiums are capped – you won’t pay more than the cover amount.
(Depending on insurer)
More control over planning your future funeral, e.g. choice of funeral director.
Keeps up with inflation to ensure the lump sum is enough to cover final expenses.
No medical examination.
The agreed lump sum benefit will be paid, even if premiums / payments or income has not yet passed sum insured / cost of your proposed funeral.

Seniors: 10 Features to focus on when selecting a funeral insurance policy for you

Your answers depend on your financial situation, age, health and medical history.

number-1The cost of a funeral

To know how much cover you need, you first need to determine what type of funeral you want, for example, cremation is less expensive than a burial service. It’s also important that you’ve shared these details with your loved ones.

number-2Short term & long term affordability

Every policy offering is different, so you should consider both short term & long term affordability. As a senior on an Age Pension or Annuity, your income may be limited, consistent or diminishing. Therefore, consider policies that offer capped premiums.

number-3Premium options

Senior citizens should ideally choose policies that offer level premiums, which start off higher, but generally do not increase every year due to your age (excluding inflation).

number-4Entry Age restrictions

Consider the age at which you are still eligible to take out a policy, as well as the age at which your policy may expire, for example, if you’re 75 you should probably not buy a policy that expires at age 80. Look for policies without expiry ages.

number-5Discounts or Built-in options

Look for a policy that offers additional benefits, such as discounts for covering multiple people, or free will kits and or any other benefits relevant to you.

number-6Payment options

Many insurers reward seniors for paying their premium in an annual lump sum, instead of fortnightly or monthly payments. You might receive a discount of 5-8% due to reduced administrative costs.

number-7Cover Indexation

Generally a built in feature increases your level of cover by 3-5% each year. While this may suit some people, you should have the ability to stop these increases if you don’t want your sum insured and premium to increase.

number-8Short Accidental Death Period

Consider policies that have a short accidental death period of 12 months (or if replacing an existing policy that provides no Accidental Death period). As longer accidental death periods will make it harder for you to claim.

number-9Guaranteed acceptance

Funeral policies with guaranteed acceptance, meaning no medicals required during application stage, are more expensive, but your health or pre-existing medical conditions will not cause you to be rejected.

number-10Worldwide Cover

You want to ensure that the policy offers you cover 24 hours a day, seven days a week worldwide. Ensuring your travel plans won’t affect your eligibility to claim.

It’s important that you consider these 10 features when comparing insurance options. Seniors funeral insurance options can be limited the older you get, therefore, best to shop around to compare multiple offers before selecting the right policy for you.

What to avoid

Cancelling when you need it most: Keep in mind, when looking for funeral cover you want to choose an option that will allow you affordability, even when you’re older than 80.

Long accidental death periods: Avoid policies that have long waiting periods (two plus years), as you are more likely to die from natural causes when you reach a certain age, than from an accident.

Stepped Premiums: Avoid funeral insurance that only offers stepped premiums, which may start off more affordable, but increases as you age. Stepped premiums may force you to cancel your policy when you need it most because it becomes too expensive. Before ASIC recommendations, the average annual premium for senior citizens was:

Age Average annual premium Premium difference
50 to 54 years $375 $50
55 to 59 years $425
60 to 64 years $500 $75
65 to 69 years $625 $125
70 to 74 years $700 $75
75 to 79 years $975 $175
80 years plus $1,350 $375
Source: ASIC

As is clear from the above table, there is a significant increase in premium pricing among people over 69 years old. Even more glaringly obvious, is the massive premium difference between 70-year-olds and people over the age of 80.

Because premiums are calculated using life expectancy, people could end up paying more in premiums than the cover amount. If you’re unable to keep up with the rising cost of premiums or you miss a payment, your policy could be cancelled and your cover, including everything paid thus far, will be lost.

To address these concerns raised by ASIC, a number of insures have introduced policies with capped funeral insurance premiums. Meaning, you’ll never pay more for your policy than the cover amount.

Funeral insurance for over 80 year olds

Funeral insurance for over 80 year olds is very expensive because the older you get, the higher the risk of you claiming for funeral cover. Which makes sense, seeing as Australia’s life expectancy has been steadily rising since 1970? The average life expectancy for Australians, as of 2014, was 82.25 years.

There are a number of more affordable ways you can pre-fund your funeral, including funeral bonds, pre-paid funerals and savings. Another option you might want to consider is having your adult children take out a funeral policy for you.

Funeral cover for parents

Taking out funeral cover for your parents is a good option when they live on a fixed income, and you can afford to pay the premiums on their behalf. Often you can elect yourself as the policy owner and beneficiary to help the ongoing administrative side of things which will also make the claiming of the final benefit payment easier.

Alternatively, select an insurer such as Clearview who will allow you to add Parent Cover onto your policy, however, you must have and maintain a life insurance policy with that particular insurer for your parent cover to stay in place. Parent cover is available from Clearview, with a minimum insured amount of $5,000 and a maximum of $15,000.

Funeral insurance in Australia can be very expensive for people over 65. Retired seniors can benefit from knowing their loved ones will be able to pay their final expenses when shopping around and comparing funeral options before retirement age.

Published: August 10, 2017
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