Funeral Insurance meets the needs of many families, but it is important to look at your individual needs and establish whether this funeral planning option is best for you. Even though the monthly premium seems cost effective, there are a number things to consider.
Over the life of the policy, it is certainly possible to end up paying more than the final cost of the funeral. As with all insurance policies – protection comes at a cost and it is crucial that you weigh up all the planning options available.
A funeral insurance policy is not a savings plan. If you cancel the policy, or fail to meet your premium obligations, you will forfeit your cover. If the cover is cancelled or forfeited, the insurance company is under no obligation to reimburse you the monies you have paid. As you can comprehend, this can be financially devastating. For example, if you held a policy for 10 years and paid a monthly premium of $40, you will have forfeited close $5,000 by cancelling your policy. If this thought concerns you, it may be worth considering a funeral savings plan.
The cost of insurance products may not be locked-in. This is why it is important to find out from the insurance company if the premium can potentially increase. Per above, if in the future you are unable to afford the increased premium, you may have to forfeit the policy completely and loose everything you have contributed.
Subject to Approval
Insurance is protection offered by a third-party. This means that receipt of the benefit is subject to approval by the insurer. An insurance company will investigate any claims made, just as they would for a home or contents claim. This means that if they find that any of the terms of the insurance policy have breached, they reserve the withhold the benefit. For example, if the insurer asks about if you have a pre-diagnosed heart condition, of which you do, and you do not disclose this to the insurer, you may have breached a term and risk not receiving any benefit.