Choosing the Right Funeral Plan for You and Your Family

Arranging your own funeral is one of the most honourable things you can do for your loved ones. While it's a morbid subject, it can be comforting to know that your family's finances will be secure when you pass. There are several ways to cover your funeral costs, each with their own pros and cons.

Pre-Paid Funeral Plans

Pre-paid funeral plans are often taken out through funeral directors. When pre-paying for your own funeral, specific services and suppliers can be agreed upon in advance. This not only helps ease the financial burden your family are faced with, but also the emotional strain involved with arranging a ceremony.

One of the main benefits of pre-paid funeral plans is that inflation rates are capped, meaning that you will be entitled to agreed upon services, even if they are more expensive after your death. Pre-paid funeral operators are required by law to reveal what the costs will cover; therefore, you should always ask for a breakdown of the costs in writing.

Funeral Insurance

Most funeral insurance plans cost between $5,000 and $15,000. Funeral insurance premiums will often increase, especially when you reach 50. After 5-10 years you could end up paying more than the upfront cost of the funeral. In addition, few funeral insurance providers offer refunds – or partial refunds – in the event of cancellations.

Funeral Bonds

Funeral bonds are available through investment companies. Your money will grow over time and can only be withdrawn after your death by a beneficiary of your choice, such as a relative or funeral director. Money invested is exempt from the Asset and Income test and can usually be paid in installments.

Unlike funeral insurance, your beneficiary can only withdraw the money that you have invested – plus anything earned on the investment. Costs will not move with inflation; therefore, if the total value of your savings bond equates to $5,000, by the time you die the same services may cost upwards of $6,000; therefore, your family or estate will have to cover the remaining costs.

Your Personal Estate

Funeral costs can be recovered from your estate before any other debts are paid; therefore, if your next of kin covers the costs, they will be entitled to the repayment. If, however, there's not enough money, they will have to pay for the excess. In the event of a financial shortfall, or if your next of kin is unavailable, your local council may cover the costs for a basic funeral instead.

The average funeral in Australia costs between $4,000 and $15,000. Failure to adequately prepare could leave your family financially crippled when you die. Assess each payment option with close scrutiny to ensure it will offer the best value for money for both you and your loved ones.  

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