The plethora of advertisements claiming funeral insurance can cost less than the cup of a coffee a week are not telling the full story, a funeral operator says.Invocare Ltd chief executive Andrew Smith says some policyholders could be overpaying in premiums by as much as 14 times what a funeral actually cost.
He said the details of rising premiums as a funeral insurance plan matures are often buried in the fine print.
Mr Smith said he decided to speak out about the real long-term costs amid an increasing amount of negative feedback from funeral insurance policyholders.
Research by Rice Warner Actuaries commissioned by Invocare shows a 60-year-old who takes out an InsuranceLine Funeral Plan, a popular policy offered by Tower Australia Ltd, would pay over $85,000 in premiums if they reach the age of 90.
A 75-year-old who takes out the same policy will have paid $20,000 by the time they are 86.
On current terms, both policies would cover a funeral worth about $6,000, Invocare said.
The research shows funeral insurance provides good value if you pass away soon after taking out a policy, Mr Smith said.
For those planning well ahead, pre-paid funerals offer better affordability, he said.
"The desire to be responsible, coupled with the effective marketing campaign by the insurance industry with some catchy little lines, is why so many Australians over 50 now own funeral insurance," Mr Smith said.
"But millions of Australians who over the last 10 to 15 years have applied the insurance model to their funeral planning needs are now starting to realize just how much they are contributing in premiums each and every year."
Funeral plans require an up-front deposit, which is often a deterrent to customers.
A spokesman from Tower Australia said many people were unable to find the thousands of dollars required for an upfront fee.
"A funeral insurance plan provides affordable peace of mind and is designed to meet the separate needs of the individual," he said.
"Last year InsuranceLine paid out around $20 million in funeral insurance claims."
Invocare will soon offer a product allowing contributions to be made toward a deposit before a plan is commenced, Mr Smith said.
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1 comment:
There are funeral bonds available now that require only a very small deposit with payment plans worked out to make it affordable, and of course these plans are not attached to any particular funeral home so the client family is still able to select their own funeral provider.
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