The difference between funeral cover and life insurance

Both funeral cover and life insurance fall under the long-term insurance category, and pay out after the policyholder’s death. However, each product has a specific purpose that should be assessed for its fit with your financial plan.

We explore the key product features, to help you differentiate between them.

Tip: Consolidating your debt can free up savings for the future.

Funeral cover

Funeral cover can pay out up to R100,000, ensuring that the costs of a burial or cremation are covered, along with associated costs, such as catering.

Payout is typically quick - often, but not always, within 48 hours - to ensure that planning for last wishes and rites can go ahead.

This is a crucial differentiator from life cover, says Kashmeera Kanji, head of market analytics and R&D at Discovery Life; and it's important to note for people belonging to faiths that require the deceased to be buried or cremated quickly.

Funeral insurance can cover up to 21 people per policy, and medical underwriting isn’t required. However, a waiting period generally applies where only accidental death is covered.

While funeral cover can be customised for your needs and budget, it does not replace broader financial protection for you and your family, says Kanji.

Life cover

Life cover provides broader financial protection through a lump sum payout after the policyholder’s death, ensuring that family members can maintain their current lifestyle, pay for education, and/or cover debt, says advocate Monica Moodley, legal manager at Old Mutual. 

“Dread disease and disability cover can be added to a policy, providing you with peace of mind,” she notes.

Medical underwriting is required in almost all instances, making the application process longer than for funeral cover.

Which product meets your needs?

It’s advisable to speak to a financial adviser to determine which product may be most suitable for your needs. However, as a rule of thumb, you should take out life cover if you have financial dependents, says Brina Biggs, a senior manager at 1Life Insurance.

“Life cover protects your family members’ financial future,” she points out.  

Funeral cover is helpful if the deceased has specific wishes to be carried out after death. “It ensures family members are not placed under financial strain in the event of an expensive funeral,” says Moodley.  

You may receive a discount on funeral cover if you already have a policy with a specific insurer. For example, Discovery’s funeral plan includes a 15% discount for all clients who are existing members of the Discovery Health ecosystem, says Kanji. Further, clients can get all of their premiums back at age 65.

To save on monthly premiums, you can combine life cover and funeral cover in one policy, insuring the breadwinner with life cover and providing funeral cover for loved ones, says Biggs. 

“Life cover normally pays out a small portion of the total insurance amount to cover immediate expenses if the breadwinner passes away,” she notes.

Questions to ask when taking out cover

A financial adviser, or your insurer, will be able to complete a financial needs analysis for you, Biggs says.

“They can assess whether you may be underinsured, and help you select appropriate cover for your life stage and the needs of your dependents, if you have any.”

Questions you can ask a financial adviser include:

• Am I buying enough cover?
• Who is covered in terms of which products?
• Are there exclusions or waiting periods?
• When will my premiums increase, and by how much? What are my escalation options?

Kanji says you should discuss estate planning with your financial adviser, and draw up a will. “This affords you the best possible chance of having your wishes met, especially regarding a funeral,” she points out.

Tip: Saving and investing can help to safeguard your family’s future.