Funeral cover versus life cover – know the difference

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Life insurance and funeral cover are not necessarily one and the same. Each offers cover based on a set structure of benefits. Each set of benefits caters for different needs.

A life insurance policy factors in funeral cover benefits, offering a financial safety net for a family, which can be helpful in both the short and longer term. Life insurance offers a wider range of protective cover for beneficiaries and insured policyholders in the event of life-changing circumstances, such as a sudden loss of income, the development of a severe disease or disability, or loss of life.

A stand-alone funeral policy offers cover for a family’s immediate needs following the loss of a loved one, providing financial support during a difficult period of time. .

It’s important for people to ensure that they look into both options to assess which will best meet their needs. It’s a very personal choice. Financial advisers, such as myself can help individuals make the right choices for themselves.

When you better understand the nature of the benefits on offer regarding either type of policy, you gain the peace of mind you really want to have. Knowing that your nearest and dearest ones will be well taken care of financially should anything happen to you is the primary reason why anyone would look into purchasing such policies in the first place. It’s important to understand what they offer and how they differ, ensuring that all of your specific needs can be adequately covered.

What are some of the key differences between the two when it comes to funeral cover?

  1. Both policy types pay out a lump sum when an insured individual passes away. Funeral policies typically pay out within 24 hours once the necessary paperwork has been completed.
  2. With a life policy, plans involve more than just funeral cost needs. This means that a lump sum pay-out will take an appropriate amount of time to process in order to provide all of the cover support a family would need following the loss of a loved one. A life plan involves the winding up of an estate, providing more long-term financial support for insured loved ones based on the agreed terms of a last will and testament. Cover also factors in financial cover for severe illness and disability, as well as income and education protection.
  3. Each policy type provides cover amounts for differently structured needs. For example, a funeral policy may provide R20 000 worth of cover, whereas a life insurance policy can offer, for instance, R250 000 worth of cover. The difference in cover amounts relates to the benefit structure of each:
    • A funeral policy covers just the short-term financial needs of a family, such as the costs of a burial or cremation, grocery purchases and airtime. A lump sum pay-out can also be used to cover some of the costs of moving a person’s remains to their final resting place, should there be a need to travel, and even gravestone unveiling.
    • Life cover extends the financial safety net a little further than the short term needs following the loss of a loved one. This policy helps to cover some of a family’s living expenses over a longer term by providing a little income when an insured breadwinner passes away. This enables a family to take care of basic bills, including rent, municipal accounts and school fees, as well as put food on the table.
    A stand-alone plan can provide peace of mind for multiple members of a family by ensuring that the costs of a dignified send-off are covered without placing additional financial strain on loved ones during their time of grief.
  4. In general, funeral policies offer the benefit of covering more people, such as an entire family. Life insurance policies typically allow cover for an insured individual or a married couple and sometimes their children.

Which type of policy is best to choose?

Many people confuse the two policy types and see them as the same kind of offering. As the amount of cover each policy type offers is different. it’s wise to consider what your needs will be – both in the short and long-term before committing to a purchase. One policy type may work best for one family’s interests but not for another. For some families, a stand-alone funeral plan works best. For others, long-term needs may be greater and a life plan is a more suitable fit.

As a financial adviser, I always try and assist by making an assessment based on the needs of an individual and their families – the beneficiaries – and provide a calculation factoring in what they can afford. This is also an important factor.

From there, we find the most comprehensive solution based on the offering of products available.

Many people also ask as to whether they need to take out a stand-alone funeral policy if they already have life insurance cover. If your plan is comprehensive enough, it may not be necessary – you will still receive adequate cover over the short and longer term. Stand-alone funeral policies can be comprehensively structured too, such as the one offered by Socovered Life and is a great solution for shorter term financial needs.

“Either plan type is able to make things a lot easier for your loved ones, ensuring that essential financial decisions are well taken care of when you can no longer provide the means,” she adds.

Socovered Life provides comprehensive cover that also rewards you for living well

1. Funeral benefits that take the very best care
Socovered Life’s funeral benefit is a comprehensive plan that protects your family from as little as R53 per month. Along with funeral cover that pays out between R10 000 and R60 000 within 24 hours of the loss of a loved one, plans available offer several other valuable benefits. These include:

  • A double cash pay-out if an insured policyholder and their spouse pass away in an accident
  • An educational needs pay-out of up to R4 500
  • A cash lump sum of up to R3 600 which can be used for the purchase of groceries
  • Unveiling cover to the amount of R5 000
  • Automatic cover for a baby for the first three months after birth
  • Continued cover for a policyholder’s spouse and children should they pass away
  • Yearly premium paybacks of up to 17.5% for policyholders on the Classic Funeral Plan

2. Plans that enhance quality of life through comprehensive protection
Socovered Life offers comprehensive, flexible and market leading protective policies to take the very best care of your family’s needs with an array of supportive benefits. Plans are also structured to reward you for living well during your lifetime.
Other than comprehensive funeral cover, these policies also include Estate planning, Severe illness, Child protection, Capital disability, Income continuation and Global Education Protector Benefits.

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Sebolelo Mhlongo

Relationship Manager
tel: 010 243 0311