Life insurance or Funeral insurance? The answer lies with what you want for your family

Prudence Thipe, General Manager: Sales and Distribution at Old Mutual Mass and Foundation Cluster (MFC)

About 7 million South Africans have funeral insurance; this is according to Finscope’s 2019 statistics. This figure underlines the importance we place on making sure our loved ones have a dignified send-off. The question to be asked, says Old Mutual, is whether it is necessary to have both types of insurance policies to achieve long-term financial stability.

According to Prudence Thipe, General Manager: Sales and Distribution at Old Mutual Mass and Foundation Cluster (MFC) consumers should consider having both policy types as they cater for very important but different needs.

“While Life insurance and Funeral insurance cater for different needs, it’s important to understand that none is more important than the other. Life insurance protects families against the financial hardships that could arise after someone has passed away. This ensures that those left behind benefit from a legacy - the chance to afford what they need to keep their lives intact. Life insurance can also help pay off expenses, settle outstanding debt, and ensure that children receive the education they deserve,” says Thipe.

Funeral insurance pays out a lump sum within 24 hours of receiving all the necessary documents. If you have an Old Mutual Money Account, we aim to pay your claim within 2 hours of a death to cover funeral costs. Once all the funeral expenses have been covered, the family is often not as financially secure as it was before the passing of a loved one. Family members are left to cope with the aftermath, and this can be especially challenging if the family lost a breadwinner, the financial impact can be strenuous.

“That is essentially the difference between a funeral insurance and life insurance. Life insurance has one aim - long-term security and looking after your family’s financial needs after you have passed,” says Thipe.

“One of the most common concerns for not taking Life insurance is cost,” adds Thipe. Life insurance policies can, however, be drawn up to meet personal needs. A policyholder can decide on the cover require or a premium they can afford and then pay based on the policy’s benefits.

“Old Mutual has an offering that allows you to choose the amount you would like to be covered for, your monthly premium is calculated based on the size of this amount and risk factors such as your age and lifestyle habits. Consumers are at liberty to revise a life insurance policy as they reach different life stages. This flexibility allows one to tailor the policy according to individual circumstances. Our aim is to ensure positive futures everyday by bridging the gap between customers’ resources and financial needs. Financial inclusion remains one of our key focus areas, because through sharing information, we enable people to make better long-term financial decisions.”

According to Thipe, for most customers, - it’s best to have both. This makes sure that immediate needs are covered, i.e. dignified funeral can occur, and that longer-term family financial support is available. A solid plan is held up by these four pillars:

1. Cover for immediate expenses (Funeral insurance)
2. Cover for large expenses (Life Cover or Accidental Death Cover, if the risk of dying in an accident is high or you are unable to take Life Cover)
3. Cover for ongoing expenses (Life Income Cover)
4. Cover for estate duty (Last Survivor Cover)

“The best way to decide this is to get professional help. A qualified financial adviser will do an assessment at no cost and suggest the best way to address your needs. The adviser can offer a policy that keeps pace with inflation so that if you pass, the payment benefit will keep pace with everyday costs. The benefit of using an adviser is that they can do all necessary assessments to ensure you are adequately covered, while also ensuring you only pay for the cover you need and are not paying for benefits that are not relevant to you at a point in time, says Thipe.”

“Funeral and life insurance are very important and should be factored into your financial planning to ensure the financial well-being of your family,” concludes Thipe.