Attending a funeral? (In person or online)


Funeral Bonds Vs. Funeral Insurance

Share this article

It is wise to consider paying for all or some of your funeral costs in advance. There are two main reasons:
(1) It enables you to make the difficult time of death easier, financially, for your family when they need it.
(2) It gives you the chance to make choices about the kind of funeral that you would like to have. This article mainly addresses the first point.

There are a few ways to ensure your funeral service and the costs involved are covered when the time comes. Here, we will discuss the difference between two main options, Funeral Insurance and Funeral Bonds.

Funeral Insurance 

What is Funeral Insurance?

Funeral insurance is a policy that will give your family a lump sum payment to assist in paying for funeral and related expenses when you pass away. It is important to remember that with funeral insurance, you are buying insurance to meet the costs of a funeral at a future date, not saving for funeral costs.

Features of Funeral Insurance

  • Cover: Cover is immediate with exclusions. You can purchase cover today however most policies only cover accidental death in the first 2 years. Make sure to read and question your policy details if unsure.
  • Payment: Insurance requires ongoing monthly, fortnightly payments or premiums for a fixed value of cover, which is typically between $5,000-$15,000. The money is paid to your beneficiary when you pass away to help cover funeral expenses.
  • Premiums: Premiums increase with age and grow over time. They can rise steeply for people aged 50+ and can result in people cancelling their policy in a few years.
    For example, if you take out $10,000 in fixed cover and pay a monthly premium of $100, you would have paid out more than the cover in 9 years, and this is without the premiums rising.
  • Cancelling a Policy: Premium payments can become unaffordable over time and result in cancellation. Unfortunately, people lose the benefit of the premiums they have already paid once they have cancelled a policy.
  • Receiving Funds: It can take time for your family to receive the funds for your funeral in some circumstances. If there are any questions around the cause of death it may take even longer.

It is important to weigh up the benefits and issues surrounding funeral insurance when deciding if it is the right option for you. Despite funeral insurance advertising filling up daytime TV commercials, there are other options available to ensure you don’t find yourself drowning in premiums.

older man signing funeral papers

Funeral Bonds

What are Funeral Bonds?

Funeral bonds are managed investments that can help you save for funeral expenses. Funds can only be withdrawn after your death, and can only be used to pay for your funeral.

Features of Funeral Bonds

  • Management: money within a funeral bond must be held in an independently managed funeral fund.
  • Interest: The interest of funeral bonds must be added (or re-invested) into the capital.
  • Access: The funds can be accessed after your death and can only be used for funeral costs. Only your estate or funeral director can release the money.
  • Asset Tests: Money invested in funeral bonds (up to an allowable limit) is not subject to asset or income tests for your Age Pension.
  • Exempt Bonds: If you have assigned the fund to a funeral director for a fully prepaid funeral service and have a contract that sets out the services that are paid in full your funeral bond will not count as an assessable asset.
  • Payment: You are able to contribute via a lump sum or by monthly payments up until you reach the selected value of your bond. Keep in mind that returns may not reflect inflation.

If you wish to pay for your funeral in advance but do not wish to think about the details then funeral bonds can be a suitable option for you. Ensure you read Disclosure Documents carefully and agree to terms.

Of course, there are other options you could consider for paying your funeral costs in advance, such as:

  • Setting up a dedicated savings account.
  • Making additional contributions to your Super fund to cover the costs.
  • Purchasing a ‘Prepaid’ funeral package.

If you are considering the last option, you can visit our pre-plan funeral information to find out more.

*This article is to be used as a guide and is not to be substituted for specific financial advice.