Many are confused about the exact difference between Life and Funeral Insurance. While you may be uncertain about where one starts and the other ends, there are key differences which should clear up any confusion.
Simple explanation: Funeral Insurance covers the cost leading up to and including a funeral, as well as the burial costs. While Life Insurance sees your family through after your passing.
Key Factors About Funeral Insurance
Funeral Insurance provides that 'Emergency Fund' when you need a large amount of money in a short space of time.
- Necessary to ensure your family can give you a dignified burial.
- Provides funds for the short-term.
- Covers all costs included in the funeral including burial, flowers, cremation, ceremony, coffin, etc.
- QUICK RESPONSE: Payout is usually settled within 48 hours, to the nominated beneficiary, once all necessary documentation is provided.
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Funeral Tips and Advice
What do you do when a loved one dies?
1. Funeral Proceedings? Find the deceased’s will as this may indicate certain funeral arrangement preferences and a “letter of wishes” with information regarding the funeral.
2. Death Certificate? The undertaker will usually arrange the death certificate. If not, you can get a copy of it at the home affairs department.
3. How do I claim from their Funeral Insurance policy? You will need your ID, a copy of the death certificate, a copy of the deceased’s ID, and the policy details to your insurer in order to claim on the funeral policy.
4. How do I claim from their Life Insurance policy? You will need the same documents as a funeral policy, as well your marriage certificate, if you are the spouse, and a medical report if death was by natural causes.
5. What if the death was unnatural? If the death was unnatural (suicide or murder), you will need the investigating officer’s report, the postmortem report and, sometimes, the inquest report. The deceased’s bank account will also be frozen.
You can report the death to the Master of the High Court. They will then issue a letter of authority to the bank instructing them to close the account and pay out funds to the executor of the estate. You can do this via your local magistrates’ office at no cost.
Key Factors About Life Insurance
- Covers ongoing expenses in the event of your passing.
- Can provide a lump-sum or fixed monthly income to your beneficiaries.
- Can also provide coverage in the event of a critical illness or disability.
- The value of your life cover is usually three times your annual salary.
- Monthly premiums are determined by your risk profile (lifestyle, health, age, gender, and occupation). Some insurance providers may require a medical exam.
- Payouts on a Life Insurance are substantial. So, it is worth investing in them to ensure your family do not fall into financial trouble, or aren't able to afford the lifestyle they are used to. Within reason, of course.
- Payouts for Life Insurance take longer than Funeral Insurance and can take several days, weeks, or even months to pay out claims.
- Life Insurance can ensure all debts owed by you do not fall onto your family. But, instead, are settled in the event of your passing.
- The lump-sum is paid to the beneficiary and cannot, legally, be paid to another unmentioned party.
- Unlike retirement funds, or other funds that form part of your estate, Life Cover does not require a trustee or executor to sign off on payment.
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Life Insurance Tips and Advice
Elad Smadja, Head of Bancassurance product development at Liberty, cautions the main beneficiary to not spend all funds received at once. Instead, opt to reinvest and grow the money in a unit trust fund. Or, if kids are involved, in an education policy.
This will ensure the money can grow over time and provide for your dependents for as long as possible.
Did You Know?
If your will says, "Give everything to my wife", this will exclude any life assurance policy if she is not the beneficiary and your parents, for example, are.
A beneficiary nomination on your Life Insurance policy can thus take precedence over your will. If there is no beneficiary nomination, however, proceeds are paid directly to your estate.