Arranging a funeral can be a stressful process. If not planned properly, funerals can also become very expensive, making things even more difficult for your family.
You could be looking at a cost ranging between $4,000 for a basic cremation service to around $15,000 for a more elaborate funeral service. That’s a lot of money for your family to pull together at short notice, leaving you to ask, ‘how can I help to relieve their financial stress once I die?’.
The good news is that there are several ways you can give your family financial assistance to help minimise the financial stress and ensure a comforting farewell. With just a little bit of research and planning, finding an option that won’t break the bank is certainly possible. This means that when the time comes, the focus for your family is on celebrating and honouring your life.
Yes, you can. Funerals can be paid for in advance with many Australians turning to this to ease the pressure on family as they near the end of their lives. Prepaid funerals enable the people to plan their ceremony in the way that they want – managing any of their own religious, cultural or lifestyle wishes to create the funeral they wanted.
Advantages: A clear benefit of a prepaid funeral is that the financial elements are taken care of for your family. They also have a clear direction of your wishes so your family know what you wanted which will make the funeral are more organised and easier to manage. Generally, prepaid funerals can be cost effective in the long-term by locking in the funeral cost at today’s prices in order to avoid rising costs. They also are excluded from the Assets Test for Age Pension. You get to choose the funeral provider, as well, ensuring your funeral is handled by someone you trust whose values and beliefs match your own. To secure a prepaid funeral, you don’t need any health checks and a Funeral Director will assist you to complete all the required paperwork. Finally, prepaid funerals offer instalment payment options, which gives you flexibility to pay it off over a couple of years.
Disadvantages: It may take time to research and consult a couple funeral providers to find the service, price and payment plan that best suits your wishes and financial situation. This could be time consuming as it’s important to carefully consider the conditions of each provider.
To secure a prepaid funeral, you will be asked to pay a deposit – even if you will be paying by instalments. This deposit may difficult for some people to afford financially.
As a final point, it’s important to understand all the finer details of what the service covers. You should always read any documentation and keep in mind any factors that could change circumstance, such as if you move interstate or you want to modify the service later. These are generally minor considerations, but it is best to ask early in the process.
Funeral bonds are an investment product that has its value made available to your family to pay for your funeral when you pass away. A funeral bond can be a great option if planned well. You can choose to either pay the whole thing at one time or to make payments in instalments. You also choose the funeral director that you trust.
Advantages: There’s comfort in knowing that there is money set aside, removing any financial burden if something unexpected happens. As this is an investment product, you should benefit from growth in the savings, which will vary from bond to bond.
Disadvantages: Unlike a prepaid funeral, a bond won’t take care of the details of the funeral, only the funds. This will be left up to you and your family to address, and for your loved ones to implement when it comes to the service. A bond also requires planning to consider how inflation may change over time and how far the money will go in covering funeral costs. Funeral Bonds can be included in the Assets Test for Age Pension so it pays to research this first before you take one up.
Taking out funeral insurance means that your family will get a lump sum payment that can be used for the funeral service and other related expenses. When paying for funeral insurance premiums in instalments, you select a funeral coverage value and the instalment amount such as weekly, fortnightly or monthly.
Advantages: You get some peace of mind knowing that your family won’t be forced to pull together funds when you pass away as it will have already been taken care of. This alleviates stress and the potential need to make financial sacrifices, leaving the family to focus on planning the funeral itself. The ongoing instalment amount is often affordable to most Australians which makes this a popular choice.
Disadvantages: Funeral insurance premiums may rise as you age so you will need to plan for this. If, during the life of the plan, you are not able to maintain the premium instalments and need to cancel, you’ll lose any prior payments made. You also need to consider that funeral costs rise with inflation and other market factors. What $6,000 would cover in insurance expenses today is unlikely to be the same as what it will cover in 15 years’ time. The length of time you maintain your funeral insurance plan can determine whether you pay more in premiums than what the plan amount is. That is, unless your insurer allows payments to stop once you reach your fixed amount.
Always read the Product Disclosure Statement (PDS) and make sure the terms are suitable for your needs and financial position.
Life insurance can be complex and covers more than just a death. It is money paid in the event of injury or illness, or in the case of death, paid to a recipient of your choosing.
Advantages: A set amount of money will be paid to your family upon your passing, meaning they have funds to put towards funeral costs and associated expenses. Another benefit of choosing life insurance is the ability to choose a ‘level premium’, an option which won’t see your premium increase with age. If you choose this option, you will generally have to pay more from the start than a plan that does have a premium increase.
Disadvantages: ‘Accidental death cover’ is a product under the life insurance banner that often comes with a long list of exclusions, limiting the possibility of a successful claim payout. On top of this, life insurance sold by an insurer (as opposed to being part of your superannuation) has been found by ASIC to have high rates of cancellation as well as high rejection and withdrawal rates of claims made. Give the product disclosure statement a good read and remember you have a cooling off period in which you can cancel the policy without repercussion.
When you pass away, your super funds are usually released to your family. Depending on how much is saved, this could be very helpful with the payment of the service.
Advantages: If you have maintained a healthy superannuation balance, there could well be enough in the fund to pay for your entire funeral. Your super plan may also come with life insurance, which could also provide additional funds. Using Superannuation comes in handy when someone may not have immediate access to available funds, may not have existing insurance or Prepaid arrangements in place and requires fast approval of funds.
In Australia it is not possible to access the money in your superannuation fund until you have reached your retirement age. There are, however, compassionate grounds that may permit you to withdraw some of the money in your superannuation fund to pay for expenses associated with a death, funeral or burial of a partner, child or other dependant. The Australian Taxation Office has information about early access to your superannuation.
Disadvantages: Relying on superannuation to pay for the funeral can be difficult to manage. As you age, have access to your superannuation and use it for general living expenses, it can mean that you don’t have the funds to pay for your funeral at the end of your life. Waiting until then can also mean costs may have increased by the time of your death which can lead to higher costs than if you had prepaid for your funeral. Please consult with your super fund to better understand how your superannuation could be used for funeral costs incurred.
For those in financial difficulty, the Federal Government may be able to assist with payments for eligible persons ranging from widow support to a bereavement allowance. Veterans and their families may also have certain entitlements from the Department of Veterans’ Affairs. The Department of Human Services’ funerals page outlines the details.
Your own State government may also provide some assistance in case of financial difficulty or when nobody pays for a funeral. This varies between States and checking out their websites is a good place to start.
No matter what option you decide to go with, reading about all inclusions and exclusions is key. Never feel pressured into anything when it comes to planning your funeral. It’s important to not only consider the needs of your family and how to relieve their stress at a difficult time, but also to utilise a payment option that best suits your circumstances. Our online cost comparison calculator is a good starting point to understand and compare prepaid funeral costs to funeral insurance . For further assistance, please consult your financial planner or a financial counselling service.
*Funeral Planner does not offer financial advice. Please see a financial planner to help you decide on the best option for you.
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