The high cost of death

2015-04-12 10:25

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Funeral policies do not cover this kind of scale. This tombstone was created to honour a late Russian mafioso PHOTO: ar15.com

The cost of death in a family is often the start of a debt trap. #Trending looks into funeral policies.

‘About 85% of people’s debt problems start with a death in the family,” says debt counsellor Deborah Solomon.

“It is not only the cost of the funeral, but the expatriation of the body and looking after the dependants when a breadwinner dies that creates a financial burden,” says Solomon.

Yet when one looks at the insurance figures in South Africa, the highest coverage is for funerals. FinMark Trust estimates that about 64% of the population has some form of funeral cover, either through a burial society or formal policy.

FinMark’s FinScope Survey found that, after basic survival needs like food and water, the biggest financial priority for lower-income earners was the ability to provide a funeral and proper sendoff for loved ones. This was often a priority ahead of even education.

Members of Tirisano Burial Society in Mohlakeng contribute R150 a month. Each member is given R1?500 to assist with a family funeral
Picture: Sammy Moretsi

Researchers found people tended to belong to multiple burial societies to ensure coverage of all family members. Some societies just covered the husband and wife, and some were just for the children or grandparents.

Different societies also covered different funeral costs. Some focused on coffins and tombstones, while others provided food and funeral function supplies, such as chairs.

It is therefore not surprising that financial advisers and debt counsellors argue the amount spent by the nation on funeral cover is excessive – and at the cost of education, retirement and even debt repayments.

So why, if funeral insurance is such a priority, do we see people becoming indebted when there is a death in the family?

Solomon says the funeral cover is often not enough to cover the costs.

FinMark Trust found the total cost of a funeral was in the region of R60?000 to R80?000. The costs ran over a period of two to three years and the first two weeks after death were the most cost intensive.

The research indicated a typical funeral policy payout would be about R25?000, which was only enough to buy the coffin and pay for the storage and transportation of the body. Other costs, such as buying a cow for slaughter, additional funeral food and a tombstone, often had to be funded by savings or going into debt.

The same problem afflicted burial societies. One typical South African interviewed for the study found that when his father passed away, the society only managed to provide R3?000 for the coffin. The son ended up putting in an extra R7?000 to get his father a “decent coffin”.

A research paper, Paying the Piper: The High Cost of Funerals in South Africa, suggested the average household spent the equivalent of a year’s income on an adult’s funeral. Only about a quarter of the costs were covered by formal or informal insurance.

The authors of the paper say the scourge of Aids has contributed significantly to financial pressure around funerals.

“In southern Africa, social norms surrounding funerals were set at a time when people died largely in early childhood, where a simple funeral was held, or in old age, when burial society or funeral policy contributions could help reduce financial strain on the household,” write the authors.

“[An] increase in mortality in middle age can lead to economic hardship if those who die do not have burial policies and if norms of what constitutes an appropriate funeral do not change to reflect the change in mortality patterns.”

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