Funeral Insurance: What You Need to Know
Are you prepared for the unexpected?
Funeral insurance is a sensitive topic, and recent media coverage has shed light on a crucial aspect that consumers should be aware of. In this article, we'll explore why it's essential to read the fine print and how one woman's experience highlights the importance of understanding your policy. Get ready to uncover the details that could make a significant difference in your financial planning.
The Fine Print: A Close Look
Funeral insurance is a product that often gets overlooked, but it's a critical aspect of financial planning. Karen Stevens, the Insurance & Financial Services Ombudsman, emphasizes that there are many nuances to consider. One of the key points is that funeral insurance is a risk product, not a savings or investment plan. If you stop paying premiums, your coverage lapses, and the total premiums paid can exceed the payout amount if you live longer than expected.
For instance, in a recent case, Ann arranged funeral insurance for her husband in 2010 with a sum insured of $20,000. By 2020, she realized she had paid more than $20,000 in premiums, which exceeded the policy's payout. When she contacted the insurer to stop or reduce the premiums, she was informed that this wasn't possible if she wanted to maintain the coverage. Ann then complained to the IFSO Scheme, highlighting that she hadn't been warned about the potential excess premiums. The IFSO Scheme found no such warning in the policy, and after discussions, the insurer agreed to cancel the policy and refund all premiums paid.
Uncovering Hidden Details
Another often-overlooked detail is that many funeral insurance policies only pay out in the first 12 months if the death is accidental. Miranda bought funeral insurance for Juana, as she was Juana's sole caregiver and her family was not in contact. When Juana died from a terminal illness less than a year after the policy started, Miranda was shocked to discover that her claim for funeral cover was declined because the policy only covered accidental death in the initial 12 months.
Legal Proof: An Essential Aspect
Stevens also points out the importance of providing legal proof when claiming on behalf of an estate. Lin arranged funeral insurance coverage of $25,000 in 2012. When Lin passed away in August 2024, her daughter, Mei, made a claim to the insurer. However, the insurer requested evidence that Mei was the executor of Lin's estate before paying out the benefit. Mei's complaint to the IFSO Scheme was not upheld because she needed to provide the necessary legal documentation to prove her entitlement to receive the benefit on behalf of the estate.
Making Informed Decisions
The IFSO Scheme recommends that consumers carefully consider whether funeral cover is the right product for them. Stevens advises taking time to calculate the potential premiums over time if you have a long and healthy life, reading the policy carefully, and asking the provider to explain any exclusions, waiting periods, or documentation requirements.
If you have concerns about your funeral insurance or believe your claim has been unfairly declined, don't hesitate to contact the IFSO Scheme. They are independent, fair, and free for consumers, ready to resolve complaints about insurance and financial services. For more information or to make a complaint, visit www.ifso.nz or call 0800 888 202.
Remember, being informed is the first step towards making the right choices for your loved ones. Stay tuned for more insights and don't forget to share your thoughts in the comments below!
