Confront the necessity for funeral cover and the reality of ever-increasing funeral costs
The global Covid-19 pandemic changed the conversation around the value of funeral cover to a large degree, but taboos still exist. Its discussion can still seem a daunting task involving cultural taboo, superstition and emotional discomfort. However, it’s crucial to address this subject openly and honestly.
It can change the legacy a person leaves behind and mitigate the financial distress of those who have to scramble for funeral funds when a tragedy occurs.
High net-worth individuals often understand the value of comprehensive planning, including how funeral cover fits into a broader estate strategy to protect the legacy they wish to leave behind. Regardless of demographic, however, funeral cover is an essential financial planning tool.
There are products catering to both affluent individuals and the middle-income demographic, and policies that can help individuals in the lowest LSMs, but the crucial funeral cover conversation has to take place, no matter how uncomfortable — starting with the family.
Discussion needs to be constructive and the value of life cover communicated along the lines of how it embodies a commitment to loved ones, a proactive approach to managing life’s uncertainties, a step towards leaving a legacy of financial health and the family not falling into debt. Integrating funeral cover into a family’s financial strategy is an act of foresight and care.
According to Kobus Wentzel, Head of Distribution at 1Life, one misconception that needs dismissing is that funeral cover is for the less wealthy, saying this couldn’t be further from the truth.
“Death does not choose a social class, gender, race, or religion,” says Wentzel. “Insurers offering funeral cover have a responsibility to instil a culture of correctly preparing for funeral costs, regardless of what level of the market they are targeting. They are an important part of the support system at the time a death occurs and beyond just considering wealth preservation, should guide families on what is expected of them, such as legal requirements.
“Choosing funeral cover should consider the speed and efficiency at which cover is paid out and whether or not it provides a financial buffer for the policyholder. The cost of a funeral starts at around R15 000 and can go over R100 000. Beneficiaries — regardless of whether they are affluent or not — should not be left carrying a financial burden on top of dealing with emotional stress.”
No age discrimination
Funeral cover is not the domain of the middle-aged or senior citizen. It’s also vital for younger South Africans, who are building their futures. Death, regardless of age, can be unexpected and even if the younger demographic is juggling student loans, early career expenses and family responsibilities, there is significant value in securing affordable funeral cover as part of their financial planning, fitting it in around cultural priorities and family preference.
The mix of traditional and cultural expectations, lower barriers to entry by some insurers, and perceived reasonable costs have provided a good platform for the South African funeral insurance industry to flourish.
Life and funeral cover has become a very competitive market segment, with many traditional financial companies such as banks now offering life insurance cover and services like drafting and storing wills. There has also been a notable growth in companies — whose core business can be anything from coffee to furniture — diversifying into providing financial services offerings such as funeral and life cover products.
However, be cautious of funeral cover policies with organisations that lack the decades-long expertise and experience in the death and burial business held by such companies as Assupol, AVBOB and Doves Group.
Underlining the importance of the family discussion around what policy to go for is the value in getting trustworthy input on such factors as manner of burial, number of people to cover on a policy, and whether or not to consult an independent financial advisor.
Final resting place
Consider also that with South Africa being as culturally diverse as it is, funeral planning must factor in the manner of burial. Religious and cultural beliefs influence such decisions as cremation versus burial, coffin versus shroud, church service versus celebration of life, cemetery choice or other options. These are just some aspects the family and policyholder should all collaborate on before deciding on which policy is the most appropriate and which companies, like AVBOB, are able to offer additional free benefits to its policyholders. AVBOB is also the only funeral director that offers aquamation (an accelerated process of returning a body to nature) as one of its body disposal options.
“An executor is absolutely vital, as is the importance of speaking to a financial advisor or fiduciary practitioner registered with the right professional authorities,” says Executrust’s Marietha Roos, fiduciary specialist and certified financial planner. “The role of the advisor or specialist is not to push products, but to give tailored advice and suggest the most appropriate individual solution.
“A policyholder must appoint someone they trust as executor of their estate in order to protect the interests of their beneficiaries. In the event of death, the reaction of families can be motivated by emotion or panic, and mistakes [are] made. When the executor has been appointed, that person takes over the role of the policyholder and has the permission and mandate to keep bank accounts open, rearrange debit orders, keep the legal side compliant and keep an audit trail of transactions and relevant sundry policyholder information — all in the best interests of beneficiaries.”
The funeral cover discussion holds as much importance within the employer-employee space as within individual families. Insurers offer group scheme policies requiring a minimum membership and options cover the employees from large corporations to small and medium enterprises. There are also voluntary group scheme options which cover such entities as burial societies, church groups and stokvels.
Open communication
With South Africa facing multiple economic headwinds, South African consumers are being adversely affected by rising prices and shrinking budgets. A funeral cover policy requires a monthly premium that can be structured according to available disposable income. A policy should be taken with a company that proactively prevents policyholders being over-insured, assists in making sure the cover is adequate, regularly evaluates cover appropriateness and helps when financial difficulty affects payment of premiums. The importance of maintaining open communication and a transparent relationship with the insurer cannot be stressed enough as there are always options to maintain cover in the event of financial changes such as retrenchment, becoming ill or disabled, or going on pension.
It’s also important for the policyholder to have a nominated beneficiary who will be paid out in order to make the requisite funeral arrangements when a policyholder passes away. Both beneficiary and executor should be able to access important documents as soon as possible after a policyholder’s death. Policyholders, beneficiaries and executors should be appraised of all policy benefits and terms and conditions, and know and understand the fine print.
Only by breaking the taboos around discussing death can policyholders — regardless of their financial standing — take charge of their family’s financial future, ensure their legacy is handled responsibly and gracefully, their wishes respected, and have the comfort of knowing their families are not burdened with unforeseen funeral costs, allowing them to grieve with dignity.
