Funeral costs dig deep

2013-11-10 10:00

At least 9.2?million adults have formal funeral cover, writes Neesa Moodley-Isaacs

‘I realised that it was an oversight to be just paying for mortuary or burial society only. Last month I joined Boxer.

“They have a package and they are with Nedbank. You pay R20 a month and they pay out R5?000,” says Pelo.

According to Finscope South Africa 2013, Pelo is just one of many South Africans who have come to this realisation.

The survey, released earlier this week by Finmark Trust, shows that 9.2 million adults have formal funeral cover and 25% claim to belong to burial societies. While formal funeral cover went up significantly, burial-society membership dropped by 4%.

There are 2.6 million new entrants to the insurance market who took up funeral insurance this year.

The survey revealed that of those who had funeral cover, the majority had at least two funeral-cover products.

While the proportion of people who are members of a burial society has declined from 10?million last year to 9.1?million this year, there has been a strong uptake of funeral policies from banks and insurance companies.

How much will a funeral cost you?

The cheapest funeral package at Avbob in Mthatha will cost you R10?830.

This includes a coffin, 100 programmes, a grave tent, a funeral notice in the newspaper, body removal within the area, preparation and storage of the body, registration of death and fresh flowers.

The Mthatha municipality will charge you grave fees of R844.29 for an adult grave and R456.02 for a child grave.

Six years ago, Avbob in Cape Town would have charged you R8?500 – which would have included a coffin, hearse, hymn sheet, notice in a newspaper, flowers, grave fees, equipment for digging the grave, a marquee, chairs, registration of death and storage of the body at a mortuary until the funeral.

Bear in mind that funeralcosts can escalate sharply, depending on the choices you make and the trimmings you opt for.

For example, a more expensive funeral can include a more expensive hearse as well as a limousine for the immediate family members and an embellished coffin ranging from a casket to a tiered coffin with satin or velvet linings.

If a family member dies in a state hospital and you cannot afford a funeral, or if the family cannot be traced, hospital management can arrange for a “pauper’s funeral”. Certain funeral parlours handle this type of funeral.

They are contacted by the hospital authorities and cremate the body at the state’s expense.

What you need to know about funeral cover

One of the most traumatic events you will experience in your lifetime – planning a funeral – is difficult on many levels. Funeral cover provides you with a payout within 24 hours to cover the costs, which can in some cases amount to the same cost as a small, second-hand car.

A few questions you should ask when taking out funeral cover:

» Does the plan allow you to choose the funeral director?

» What if your chosen director goes out of business?

» What happens if the insured party dies in another country or far away from home? Will the policy cover the costs to take the body home for a funeral?

» Can the funeral director arrange a funeral of a different standard from the one you have chosen?

» Could there be any other expenses for the funeral and what happens if there are?

» Is it possible to cancel the plan if circumstances change. For example, if you’ve arranged for your spouse’s funeral, but you later separate?

» Are there cancellation charges?

» What if there are outstanding payments at death?

» If you pay by instalments, how long is the payment term and do you have to pay interest?

» What happens if there are outstanding premiums at the time of death? Does the policy not pay out, or are you allowed to pay the outstanding premiums to receive the agreed payout?

» What freedom do you have to change the details of your funeral plan?

Get a good policy and stick with it

Although rising funeralcosts have increased the necessity for funeral cover, you need to be wary of overspending on this particular insurance product.

Find one good funeral policy that will cover the costs required by your family and stick with that policy.

Avoid the temptation to sign up for various funeral plans just because they are offered to you.

A decision to take out funeral or life cover should form part of a proper financial plan rather than simply buying policies every time a broker knocks on your door.

If your commitments to your funeral policies result in you being unable to meet your debt obligations, you urgently need to review your cover.

Remember that taking out more policies than you can afford will also result in defaults and your policy will be cancelled with no refunds – a waste of money that could be put to better use.

Finscope 203 survey results

Aside from changes in the use of funeral cover, the survey yielded the following information:

»?Fifty percent of South Africans earn a personal income of less than R2?000 a month. This includes the 11% who do not have a personal monthly income.

»?Sixteen percent have or use no financial products to manage their money. If they save, they keep their money at home and if they borrow, they rely on family and friends. This statistic is down from 19% last year.

»?Almost 32% use a combination of banked, other formal (nonbank) and informal mechanisms to manage their financial needs, indicating that their needs are not being fully met by the formal sector alone.

»?The banked population has increased since last year – attributed to the roll-out of the SA Social Security Agency system. At least 93% of social-grant recipients are registered. This means they have a bank account into which their social-grant money is paid and a MasterCard that can be used for payments.

»?At least 28% say that banking fees are too expensive, while only 26% indicated that they find banking easy to understand.

»?A person residing in an urban area takes, on average, about 11 minutes to reach an ATM compared with a person residing in a tribal area, who would take more than 47 minutes on average.

»?Of banked adults, 65% prefer using bank cards instead of cash to buy things and 31% withdraw all their money in one go.

»?At least 35% of banked adults get cash at store tills using a bank card at least once a month.

»?Most people who save formally are saving for emergencies, with lower proportions saving for education, death and funerals. For those with informal savings, the primary reasons for saving are food and funeralcosts.

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