Should I really have funeral AND life cover in my 20s?


There are endless kinds of insurance being marketed to South Africans at any given time - on the radio, online and via those annoying smses or recorded calls.

South Africans are particularly fond of funeral cover, largely because it is one of the cheaper forms of short term insurance (“You can pay as little as R1 a day” said the infomercials when I was growing up and, even though I didn’t have I job, I always wanted a funeral policy because it just sounded so reasonable).

And figuring out what's right for you can be very confusing - until recently what I thought was life cover, which I had had for years, was actually a smallanyana funeral cover. Whomp!

Funeral cover: 

Funeral cover in South Africa is quite popular, it’s estimated that over 24 million people hold or are covered by some kind of funeral cover.

What do I need it for?

Funeral cover is short term insurance that is taken out for the event of death of the policy holder (usually the breadwinner in a household) and/or anyone else that has cover taken out for them.

How many forms will I need to fill out?

Funeral cover is fairly easy to take out and often excludes medical assessments. Some providers are even able to set you up over the phone, but it is imperative to read any and all documents you get sent. 

How are the funds paid out? 

The funds are paid out on proof of death of the insured person (usually a death certificate) and can be paid in a lump sum to cover funeral preparations and some other household needs a month or a few months thereafter, like groceries. 

What won't the insurance cover?

What’s important to remember with funeral policies is that they are largely about the burial event and often have little or no benefit for after the funeral.  Particularly the cost of a loss of a breadwinner, or if the funeral cover is not enough to cover all the burial costs and the family incurs additional costs they haven't budgeted for. 

Funeral cover is not intended to cover loss of income as the result of a death in a family. Families often find themselves in dire straits as a result of being under-insured and/or incurring additional costs not covered by the funeral plan.

So it’s important that you take out other insurance to cover yourself or your family against loss of income, outstanding debts, etc.

What are your provider options? 

Given how lucrative this type of insurance is, there are many players in the space and many of them are registered with the Financial Services Board (FSB) such as Hollard, Liberty, Assupol, but there are also providers who aren’t registered (beware the shady ones by checking if they are registered.)

Increasingly banks, retailers, cellphone networks and other credit providers as well are offering funeral cover services so you have lots of options to look at before deciding on a final one and hopefully finding the best possible deal for you.

Life cover: 

What do I need it for? 

Life cover is an important but less popular kind of insurance cover which ideally should be taken out in conjunction with funeral cover, but as we know income inequality means that sometimes this isn't possible.

Essentially life cover looks at insuring you and/or your dependents against the costs of the loss of life of whoever is insured. 

How many forms will I need to fill out?

Life cover looks at the cost of the life of the insured, assesses the risks through various means including a medical examination, what depends on the life (dependents’ needs, existing debts that would need to be honoured, etc) and insures the policy holder for an amount that would reasonably cover those costs in the event of death, disability or dreaded diseases. 

Can I afford it? 

Life cover is often on average costlier than funeral cover, and dependent on your risk profile. It has a more involved vetting process, but (where it is affordable and an option) is a valuable short term insurance that covers that which other types of insurance will or do not cover.

Okay, what else do I need to know?

With all types of insurance, it is important that you check the following:
1. Whether the provider is registered financial services provider,
2. What their exclusions are before you need to claim(so what they won't pay out for and in what circumstances) to make sure you won't be without money when you need it most.

Do you have any tips when it comes to life vs funeral cover? Tell us about them.

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