When choosing a policy for funeral cover people do get confused between life insurance or a funeral plan. Life insurance is a contract that specifies it will pay out a lump sum to someone you choose (the beneficiary) in the case of your death. It’s always a good idea to have life insurance, especially if you have dependants or people who rely on you. View it, as a peace-of-mind policy, to know that those you leave behind will be okay. You may not need life insurance if you are single with no children, or you have contingency plans in place. There are several different options for life insurance, but the two main types are:
Types of Life Insurance Covers - Life Insurance or a Funeral Plan
- Whole of life insurance: This policy usually only covers up to the age of 90. Although, it is called all of life cover, it will only cover up to the age of 90 and may not be pay out enough to cover the funeral cost.
- Term life insurance: this policy runs throughout a chosen ‘term’ period and will only pay out if you die within the term you choose. The most common term periods are between 5 and 10 years. The younger and healthier you are, the cheaper the payments are.
How Much Will My Beneficiaries Get? - Life Insurance or a Funeral Plan
When you are choosing a life insurance policy, you can choose the amount that will be paid out to your beneficiaries at the time of your death. The larger the pay out, the more expensive the monthly premiums will be. Also, the premium will go up or down depending on health status, and age.
What If I Have A Long-Term illness? - Life Insurance or a Funeral Plan
It can be significantly harder to find an insurance provider that’s willing to underwrite a life insurance policy for you if you have a critical or long-term illness. From a business standpoint, it becomes much riskier for them to underwrite and guarantee your policy because it’s more likely that they will have to pay out on your policy more than what has been paid in. It’s not impossible to find a lender in some instances that will do it. But you can bet your premiums will be much higher for the policy.
What is Critical Illness Cover? - Life Insurance or a Funeral Plan
Another option you may want to consider if you have a critical illness is, critical illness cover. It’s designed to cover you in the event that you are not able to continue working because you are critically ill. Some life insurance policies have a critical illness clause written in that would offer some benefits in the case of not being able to work. One thing to consider however is that these types of policies will only pay a "pay out" once. So, if you choose to take a "pay out" after a diagnosis for example, it will not also pay out if you die later. You will have to carefully consider your options and make the decision that is best for you and your family.
Also, be aware that the critical illness cover will only cover illnesses that have been specifically listed under the policy. There are other options available as well that can be helpful to bridge the gap between illness and income. There are some policies that are called income protection policies and just as the name states, they are designed to help you protect any or all lost income due to your inability to work because of an illness. These payments however will directly correlate with your lost salary and aren’t chose based on what you think you’d like to be making. If you have one of these policies and change jobs, be sure to let your carrier know as that will change your policy based upon your new job details and salary. Some policies will become void if you do not update your information. Read the small print carefully.
How do I Get the Best Rate? - Life Insurance or a Funeral Plan
Again, your rate or premium amount you pay will be in direct correlation to your lifestyle choices, your age and your health. If you are a professional skydiver, you will pay more for your life insurance policy than someone who is a primary school teacher due to the added risks associated with sky diving. The same goes for smokers vs. non-smokers. There are added health risks when someone chooses to smoke. Some other factors that may play into the amount you are charged besides what has been noted above is the policy amount to be paid out and the term length. The more to be paid out, and the longer the term, the more expensive the premium will be.
Life insurance is a great idea if you have people who depend on you. Even if you have a pre-existing condition or illness it may be worth paying a higher premium for life insurance if you can afford it. Something is always better than nothing for dependants. If you find that you are uninsurable for any reason, it may be worth setting up a savings account for your dependants if nothing else. Again, every situation is different and you will know what you need.
What is the Difference between Life Insurance and a Funeral Plan? - Life Insurance or a Funeral Plan
Life Insurance only covers you for a specific amount without freezing the cost of a funeral and does not accommodate for the rise, so cover which may be suitable to cover you at the time of applying may not be the case in the future as it doesn’t freeze the rise. And you may pay more into it than the cost of a Funeral Plan over time and receive a fixed amount which may not cover your funeral cost. so why not enquire on how we can help you find the best cover today.