5 Cost Funeral insurance

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If you are considering taking out funeral insurance, it could be worth understanding how much it is likely to cost compared to the cost of the average Australian funeral. We crunch the numbers and take a look at the pros and cons.

Funeral insurance is a product that offers a lump-sum payout to a beneficiary upon the death of the policy holder, to pay for funeral-related expenses. It involves paying a fortnightly or monthly premium to the insurance provider to attain a set level of cover, which is often between $5,000 and $15,000, according to finance watchdog, the Australian Securities and Investments Commission (ASIC).

If you’re deciding whether funeral insurance may be fiscally suitable for you, it could help to consider the two main variables involved:

how much a funeral could cost

how much the policy could cost over the long term.

Knowing these two factors could help to determine if a policy offers value for money in the long run, which could help you to work out if the policy is the right one to suit your needs.

We have broken down the average costs you may expect to pay in funeral insurance premiums and compared this to the average cost of a funeral.

How much does a funeral cost?

Funerals in Australia can cost between $4,000 up to around $15,000 depending on the ceremony, according to ASIC’s website, Moneysmart. This can be paid in a number of ways including:

savings (either a term deposit or savings account)

prepaid funeral plans

funeral bonds (purchased from a funeral director, friendly society or life insurer)

superannuation

government bereavement payments (which may be available if you receive a Department of Veterans’ Affairs Pension)

funeral Insurance (explored in further detail, below)

It should be noted that some of the above options may take some time to be available to your loved ones, and they may need to pay upfront before claiming it back afterward.

Funeral costs vary, but in general you can expect expenses for the following:

coffin

transport

death certificate

funeral director fees

flowers

wake

burial or cremation

permits (such as to scatter the ashes)

cemetery plot

What impacts the cost of funeral insurance?

Funeral insurance premiums are calculated based on a number of factors. These include:

your age when taking out the policy

your smoking status

whether you choose level or stepped premiums (explained below)

the payout amount you choose

the provider offering the policy.

As there are so many factors involved in calculating a funeral insurance premium, it could be a wise idea to obtain a range of quotes from different providers and compare them. ASIC strongly recommends that consumers read any important documentation before making a decision, such as the Product Disclosure Statement (PDS) and the Target Market Determination (TMD).

How much do funeral insurance premiums cost? Is funeral insurance worth it?

The cost of funeral insurance premiums can vary considerably from person to person, due to their personal circumstances. However, as a general guideline, Canstar Research calculated the average cost of funeral insurance based on the providers on our database, broken down by the age of the person taking out the policy and their smoking status and for $10,000 cover.

The results showed that, in general, the average premium paid increased with the age someone takes out a policy. For example, the average monthly premium for someone taking out funeral insurance in their early 50s is between about $53 and $55, depending on whether or not they smoke. Whereas for someone in their early 70s, the average costs range between about $146 and $151 a month.

How much do funeral insurance premiums cost a month?

Average monthly funeral insurance premiums by age and smoker status

Age Non-smoker Smoker

50-54 years $52.96 $54.47

55-59 years $64.60 $66.78

60-64 years $80.32 $83.16

65-69 years $102.60 $106.14

70-74 years $145.51 $150.57

How much is funeral insurance over the longer term? Source: www.canstar.com.au. Based on level premium funeral insurance policies quoted for the Canstar 2021 Funeral Insurance Star Ratings (May 2021). Based on a $10,000 sum insured amount. Non Smoker is defined as a person who has not smoked in the past 12 months (including e-cigarettes).

Calculating how much a policy is likely to cost over the long term can help when trying to work out of the policy represents value for money. Canstar Research crunched the numbers, to find out how much the average policy would cost a person if they were to live until they were 80 years old and had $10,000 cover. The research found, in general, the total cost you could expect to pay over your lifetime (up to 80-years of age) ranged from $12,166 for a non-smoker in their 70s up to more than $17,000 for a smoker in their 50s.

Average total cost of funeral insurance premiums up to age 80 by age and smoker status

Age when taking out policy Non-smoker Smoker

50-54 years $16,585 $17,043

55-59 years $16,550 $17,096

60-64 years $16,017 $16,574

65-69 years $14,590 $15,088

70-74 years $12,166 $12,587

Based on this calculation, someone living to their 80s who had a policy with $10,000 in cover would likely pay more money in premiums for funeral insurance than their loved ones would receive from the insurance payout.Source: www.canstar.com.au. Based on level premium funeral insurance policies quoted for the Canstar 2020 Funeral Insurance Star Ratings (May 2020). Based on a $10,000 sum insured amount. Non Smoker is defined as a person who has not smoked in the past 12 months (including e-cigarettes). Total Cost of Premiums to Age 80 calculations take into account any loyalty premium discounts or refunds available, and are based on starting ages of 52 for Early Fifties, 57 for Late Fifties, 62 for Early Sixties, 67 for Late Sixties, and 72 for Early Seventies.

Types of funeral insurance

Generally funeral insurance policies are available with stepped premiums or level premiums.

Stepped premiums mean the annual premium becomes more expensive as you age and an insured event such as disability or death becomes more likely.

Level premiums are calculated based on your age and smoking status and set for your lifetime. This means that while the annual premium may be more expensive initially, it stays the same as you age with the exception of possible indexation (where the premium increases with inflation).

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