Funeral cover vs life insurance

Both products pay a lump sum when you die. Both are life insurance contracts. The differences are the size of the sum insured, the amount of underwriting, and therefore the price per dollar of cover.

An underwritten term life policy asks about your health, your family history and your habits, and prices you accordingly. That process is why the cover is cheap: the insurer knows who it is insuring. A funeral policy asks little or nothing, so the insurer prices for the risk that everyone who applies has a reason to. The cost of that uncertainty is passed on to everyone in the pool.

The consequence is that a person in reasonable health can usually buy several times more cover for the same premium by taking a small level term life policy rather than a funeral policy. The consequence for someone who cannot be underwritten is the opposite: funeral cover may be the only cover available at any price.

The practical test is to apply for underwritten cover first. If you are offered standard rates, take the term life policy. If you are offered a loading you can live with, that is usually still better value than funeral cover. Only if you are declined or deferred does funeral insurance become the sensible answer — and being declined by one insurer is not the same as being declined by all.

These are the details that decide whether the cover does what you expected. Read them before you compare on price.

• Whether you have actually been declined for underwritten cover, or simply assumed you would be.
• The initial exclusion period on any funeral policy, during which only accidental death is covered.
• Whether premiums on the funeral policy ever stop, and whether total premiums are capped.
• The maximum expiry age on a term life policy, since cover that ends at 80 does not fund a funeral at 88.
• Whether your existing life cover already includes a bereavement advance.
• Whether the sums insured available under each product are adequate for the actual cost.

Every New Zealand insurer writes funeral insurance in new zealand to its own wording, and the words are where the money is. Two policies that look identical on price can pay very differently when it matters. Closing that gap is the entire job of an adviser.

• An adviser can test underwritten cover across several insurers before you settle for a non-underwritten product.
• Where a health history is the obstacle, appetite differs sharply between insurers for the same condition.
• Level premium term life to 80 or 85 is available from some insurers and changes the long-run comparison substantially.
• If you already hold life cover, an adviser can confirm whether adding funeral cover duplicates protection you have.

There are three ways to buy life cover in New Zealand, and they are not equivalent. You can buy direct from one insurer, which means you see one product range and one underwriting appetite. You can buy through your bank, which usually means a single insurer’s product sold under the bank’s brand, often with narrower definitions. Or you can go through an adviser, who quotes several insurers at once and is required to put your interests first.

The premium you pay is the same either way. Insurers build adviser commission into their pricing whether or not an adviser is involved, so going direct does not get you a discount — it just removes the person whose job is to argue your corner at application and at claim time.

• An adviser can see which insurer is currently taking your health history on standard terms, and which one will load or exclude it.
• An adviser can structure cover across two insurers if that produces a better outcome than putting everything with one.
• An adviser handles the underwriting back-and-forth, and is the person who chases the claim when a family is least able to.
• An adviser has to document why the recommendation suits you, which is a written record you can hold them to.

We are a referral service, not an insurer. We do not quote premiums and we do not sell policies. What we do is put you in front of one licensed New Zealand adviser who can compare the market properly.

1. 1

   You tell us what you are looking at

   The form takes about a minute. Nobody asks for your medical history on a web form — that conversation happens with the adviser, properly, and only once you have decided to proceed.

2. 2

   An adviser calls you

   A licensed New Zealand adviser talks through your situation: who depends on you, what you owe, what you already have in place, and what you are actually worried about.

3. 3

   They compare the market

   The adviser quotes across the major insurers, checks which of them will take your health history on the best terms, and puts the options side by side in writing.

4. 4

   You decide, in your own time

   There is no obligation and no cost to you. If the answer is that you already have enough cover, a good adviser will tell you that.