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Should you take out funeral or life cover?

We all know we need some type of cover if we pass away, but very few of us know the difference between a funeral and life cover policy. Actually, that is not entirely correct. We all know that funeral cover is cheaper than life cover, but there are some other real differences you need to be aware of before making your decision.

Funeral cover is a product designed to provide an instant cash benefit when someone passes away. Why is that so important? Let’s answer that question with a question. If you passed away, is there R50 000 stashed away to cover the cost of your funeral? For most of us the answer to that question is ‘No’.

That’s exactly why Funeral cover is so important in your portfolio of insurances. It provides that instant cash your family is going to need to get everything sorted out. Plus, you can insure more than just your life on a funeral plan. You can cover your spouse, kids and even your extended family, like your mother and father.

Because Funeral Cover doesn’t require any medical underwriting, upfront (no medicals or blood tests), you almost always need to sit out some type of waiting period before you can claim, if you die from natural causes. That’s pretty important to remember if you are considering taking out funeral cover. The cover is also usually capped (between R50 000 – R100 000). Again, the reason for that is because the product is designed to cover funeral costs, not settle all your liabilities (like a bond) and provide ongoing capital for your loved ones.

That’s when life cover becomes a necessity.

If you don’t have any family members who are financially dependent on you and you don’t have any massive outstanding debts, like a bond or monies outstanding on your car, then perhaps you don’t require life cover, and a funeral policy will suffice.

But, if like most of us, you do have a family, a bond, two cars in the garage and a couple of pretty big personal loans, then life cover certainly is a necessity.

You don’t have life cover in place to only cover a funeral, you have life cover in place to make sure your liabilities can be settled and to provide enough capital for your family to generate an income from, long after you are gone.

Life cover is underwritten upfront (medical and bloods) because of the serious amounts of cover insurers grant (in the millions, per policy)

The truth of the matter is that you will either need a life cover policy or a funeral cover policy, depending on your personal circumstances.

It’s always best to start with some real tough questions like:-
  1. Can my family survive financially if I pass away?
  2. Do I have debts that need to be settled if I pass away?
  3. Do I have enough money to cover a funeral if one of my family members passes away?
  4. Does my family have enough money to bury me if I pass away?
The answers to these questions will give you all the answers you need - only then should you get quotes and start shopping for cover.

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The iHound