Unpacking the difference between life and funeral cover

Last updated on 5th January, 2024 at 02:54 pm

We know how important it is for you and your family to be prepared if the unthinkable were to happen. We find out whether you should be considering life insurance, funeral cover, or both.

What is the difference between life and funeral cover, really?

Funeral cover
Funeral Cover is there to take care of the immediate and often urgent costs of a funeral, explains Karen Bongers, product development actuary at Sanlam Individual Life. Funeral cover can generally be taken on the lives of any of your family members, including extended family.

Life cover
Life cover, on the other hand, is designed to take care of the ongoing costs of life itself. “Life cover is meant to cover larger and longer-term expenses like future living expenses of dependants, and paying off debt,” says Bongers. Life cover can generally only be taken for yourself or your spouse and, in some instances, on other lives where a clear insurable interest exists.

Which cover is easier to get?

Funeral cover is easier to obtain, adds Bongers. “Funeral cover generally only depends on a few rating factors, such as your age, gender and the relationship of the life insured to the applicant, for example, the spouse or child vs the wider family. Whereas “life cover involves some degree of medical underwriting (health questions and medical tests), and acceptance is not guaranteed,” she explains. “You may also need to provide additional information, such as any participation in risky part-time activities or travel plans, which could affect your premium and cover.”

Which is more expensive?

Because funeral cover is easier to obtain and acceptance is usually guaranteed, it is more expensive than life cover, says Bongers. “The premium for funeral cover is generally much higher than that for life cover of the same rand value, and the maximum cover that can be purchased with a particular provider is smaller (generally up to R100 000 for funeral cover vs millions of rand for life cover)”, she adds.

What are the pay-out times for each?

“Funeral cover tends to pay out faster, whereas life cover can take longer, as, in some instances, insurers may need to verify that the medical information provided in respect of the life insured at application stage was indeed truthful, which can take some time,” says Bongers. It’s also important to note that funeral cover also includes waiting periods (a period of time from the inception of the benefit during which the death of the life insured is not covered if it is as a result of natural causes),” says Bongers, whereas life cover usually starts from day one.

Read more about how to arrange a funeral, here.

Which policy is best for you?

“It’s important to not only take out funeral cover,” says Bongers. “There is usually a need for both, and the inclusion of life cover ensures a more cost-efficient insurance portfolio.” If you already have life cover, it’s worth asking your financial planner if you can add funeral cover to the same plan, to avoid additional policy fees.