What is the difference between Funeral Insurance, a Funeral Bond and a Pre-Paid Funeral?

When it comes to jargon, funeral directors can sometimes sound like they are speaking a language all of their own.  We have words like Pall, Catafalque, Interring, Columbarium and other terms that seem to be as foreign as they sound.  It can be difficult to understand exactly what is being talked about, especially when it comes to pre-planning, so we wanted to take a few minutes to clear up some of the questions we get about pre-need funerals.

What is Funeral Insurance?

Just like any other insurance product, Funeral Insurance is something that you pay into regularly and provides you with a certain amount of cover in the event that you pass away and someone needs to plan and pay for your funeral.  In the most simple of terms, it is like a life insurance policy that you pay money into, that covers the costs of your funeral.

Funeral Insurance can be a fantastic thing, if you are super proactive and start to think about it in your 40’s and 50’s.  Most Funeral Insurance companies will only sell an insurance plan to people until they are 54 years of age.  At that time, you are no longer eligible to hold a new funeral insurance product and would need to look at an alternative option.

This is the case with the funeral insurance product that we offer to our families.  It is for people aged 18-54 years and can be paid into fortnightly to provide funeral cover for when you need to cover the costs of your own funeral. With our policies, the applicant (or person who takes the policy and who the policy covers) only pays into the insurance cover until they turn 60. From then, you are no longer required to pay insurance premiums and your cover lasts for the rest of your lifetime.  Obviously, the later you leave it to purchase the cover, the more expensive it becomes.  So for example, someone in their 20’s may pay a very small premium, whilst someone in their late 40’s would pay a higher premium.

Either way, Funeral Insurance is a great option for people who prefer to have a product like this and is a great relief for families who are often left trying to come up with funds to cover funeral expenses.

What is a Funeral Bond?

Funeral Bonds are more like a savings account, but specifically put aside to cover funeral expenses.  These are for people aged 55 and over (usually) and have a flexible contribution method, without any minimum contributions (other than the initial start up contribution).

The main difference between having a funeral bond and a savings account, is that once you take out a funeral bond, the balance ceases to belong to your list of assets, rather, it is held in trust (usually by a friendly society) and the funeral director of your choosing is then listed as the beneficiary of the Funeral Bond.  This means that the bond is paid directly to your funeral director and not to your next of kin or executor of your estate.

For those who are receiving government assistance, they are a great way to put aside money for funeral costs without having to list the contribution (up to $13,000) as an asset and it also means that your funeral director would no doubt have a thorough understanding of your funeral wishes on file for when the time comes.  Funeral bonds can be paid into weekly, fortnightly or monthly and they continue to grow as you contribute to them.  At the time of your funeral costs, whatever is in your bond is allocated directly to your funeral expenses with only the balance payable by your loved ones.  This is a great way to relieve some financial pressure and allow people the time they need to grieve without worrying about funding a funeral.

What is a Pre-Paid Funeral?

Similar to a Funeral Bond, a Pre-Paid Funeral is a funeral plan that you work out with your funeral director and come to an exact price for your funeral expenses.  You choose all of the inclusions, the coffin, the flowers, the music, the tributes, everything that you want included, and your funeral director provides you with a confirmed price for the funeral that you create.

They then lock in those prices and you pay the agreed amount to the funeral director, who either holds those funds in trust or with a friendly society.  QLD law is strict when it comes to pre-paid funeral benefits so it is important to ensure that your funeral director has a registered fund if they don’t work closely with a friendly society.

A Pre-Paid funeral is the most convenient and thoughtful way of pre-planning for your funeral needs.  It takes all of the guess work out of your funeral planning and your family are left with very little to do to finalise funeral plans (just a few forms and signatures).

So which is best?

Regardless of whether you choose Funeral Insurance, a Funeral Bond or a Pre-Paid Funeral Plan, taking the time to make your wishes known is really what is important.  Death is a part of life and it is something that we should talk about, something that we should help our family prepare for, and something that we can have some control over.

We love the saying that “Love goes beyond death” because it is so true.  Just because someone dies, doesn’t mean we love them less, it just means that we love them differently.  Pre-planning a funeral is a loving gift that we can give to our families.

At McCartney Family Funerals, we have a dedicated Pre-Need Funeral Consultant who would be more than happy to come and visit you and talk through the options that best suit you and your future needs.  So why not get in touch with us on 1300 043 522 or preneed@mccartneyfunerals.com.au and see what options are available.

*Our Funeral Blog is a place for information and learning, so if there is something that you would like to know, why not shout out to us on social media so we can answer your questions in one of our future blogs!* 

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