Today, living costs are rising by every passing day. Soon, there will come a time where we won’t be able to afford necessary house staples. In a time like this, people usually worry about what will happen to their family when they die. Thinking about a situation that anyhow connects to your death is not something any of us would like to imagine. When you purchase a funeral insurance policy, you come to terms with the fact that one day you will leave this world, leaving your family behind. It’s not this fact that’s stressful, but not knowing how your family will survive after such a devastating loss that makes one stressed about their death.
There are many types of funeral polices and amongst those, the one that provides you with the highest benefits is final expense insurance. However, before buying a funeral policy, you need to know a few things about it.
Here’s a scenario:
In 2006, Sarah took out a funeral policy at a premium of A$30.00 that she was paying every two weeks. Not knowing how the premiums worked and being provided with insufficient information, she was persuaded by the company to go for a stepped premium, which would only increase by small amounts every year. Her initial amount was A$7,000. By 2013, she was paying A$30.63 in premiums (double the starting premium). Her cover increased by a mere A$1,500.
Keeping this in mind, let’s focus on the four things that she should have looked into:
Shop Around
Do not just sign the first funeral insurance policy you come across. Before going for any insurance policy, make a list of all the necessary arrangements and then create a budget. Using this budget, shop around and compare prices. A funeral in Australia costs around A$11,000. However, most people accomplish this task under A$8,000 by planning smartly. Make sure that the amount you come up with is affordable when the premiums are evaluated.
Level Premiums
While stepped premiums tend to increase on yearly basis according to a person’s age, funeral insurance level premiums remain steady. Initially, you would have to pay a higher premium but the amount is not increased. This is the most important thing to look into because down the road, it’s possible that you might not be able to pay stepped premiums. Moreover, the steady premiums offer you one of the biggest benefits, which lead us to the next thing – paid up insurance.
“Paid Up” Insurance
Paid up insurance allows you to stop paying your premiums after 10 years. The money will remain as it is and none of your premiums will be lost. This gives you the benefit of maintaining your cover without losing any payment and you get the funeral insurance amount you locked in.
Check Restrictions
Say you have taken out a funeral policy for 5 years. However, before the five years are up, you die in a car accident. Will the insurance company pay the sum assured to your family in this case? This is what you need to decide while signing the contract, so that your family is not left stranded when it’s time for making the funeral arrangements.
Remember, the most important thing to look into is the premiums. This will decide whether you will be able to continue with the payments till the day you die or not. Therefore, before going for a funeral insurance policy, keep these four things in mind.
