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The cost of funerals has risen significantly over the last few years. Do your clients have enough cover or are they underinsured? The impact of being underinsured can be financially devastating for families, often leaving them indebted for months and years to come. Reviewing policies and sums assured, using the latest estimates of funeral expenses, can help your clients select the appropriate cover amount and avoid financial distress.
The cost of a funeral may be higher than expected
Although individual preferences and budgets determine the total cost of a funeral, knowing how much your clients could spend on a funeral can help you give the appropriate advice when it comes to determining the sum insured. It’s not just about how much cover they need for themselves and their loved ones but also about affordability. We researched funeral costs to help you and your clients make informed decisions. The list is extensive, but not exhaustive, and your clients may have further needs, based on their cultural religious or traditional beliefs. Costs are estimates only at the time of writing this article.
The type of funeral influences the cost
A funeral provides the opportunity to honour, respect and remember a loved one and can be an important part of the healing process. Planning a funeral can be difficult as it can add more emotional and financial strain on the family during their time of mourning. South Africans spend over R12 billion on funeral services each year with formal and informal service providers consisting of at least 70,000 undertakers and 15,000 funeral parlours, according to the independent research organisation Who Owns Whom.
There are a host of different options when it comes to funerals, and the type of funeral and number of people in attendance can influence the cost dramatically.
A traditional funeral that includes a burial is by far the most expensive, with cremations and simple ceremonial services being more cost-effective.
Choices that influence the cost of a funeral:
Burial plots: These range from lawn sections reserved for headstones only, to monumental memorials and memorials or niche walls reserved for inscribed plaques. At municipal grounds these start at around R2 000 but can be as high as R9 000 for non-residents in some municipalities. Plots in private memorials, such as Nasrec and Fourways Memorial parks, are over R20 000.
Coffins and caskets: Coffin prices start from as little as R800 for a very basic coffin to over R8 000. More elaborate caskets range between R30 000 and R100 000.
Undertaker fees costs: These start at around R4 000, but can escalate to over R10 000, depending on the duties provided, which could include an autopsy if needed, storage of the body, processing the death-related documents, organising death notices, preparation of the body and organising a hearse. Their most important function is taking care of the funeral arrangements.
Gathering costs: Venue hire ranges between R500 and R10 000 and hiring a marquee can cost up to R5 000. Catering can start at R35 a head but can increase to over R100 a head. Many cultures in South Africa require the sacrificing of livestock. With the cost of a goat at around R1 000 and the cost of a cow being around R6 000.
Flowers: These can add to the atmosphere of the funeral and normally include an arrangement for the front of the church or venue; or around a photograph of the deceased and one on top of the coffin or casket. The cost can range from R100 to R10 000.
Other costs: These could include chapel and/or community centre hall hire at R1 200 an hour, transport and accommodation for mourners from R500+ and Order of Service from R680+. If the deceased’s body must be repatriated across border, costs can be as much as R10 000.
The final figure: Working out how much your clients could pay will help them decide how much cover they require. For a municipal plot, basic coffin and undertaker services, the costs are at least R10 000. Add in costs for a gathering, for say 50 people at R70 a head, and a marquee, and the amount needed is around R20 000. With additional expenses (transport, chapel hire, accommodation), a funeral is estimated to cost around R30 000, the price could increase further if a private burial plot is required. Cleansing ceremonies can add at least another few thousand to the costs.
The impact of being underinsured
Monitoring funeral costs over the years shows that they have increased, in some cases significantly. If the sums assured for members on a funeral policy are not reviewed and updated regularly, your clients could be underinsured.
The impact of underinsurance can be devastating financially, and emotionally. Underinsurance always has an immediate monetary impact, when clients need to find money to pay immediate costs, and long-term consequences when budgets are strained by higher debt repayments from loans incurred to pay funeral expenses. Clients who don’t have enough funeral cover are more than likely going to take on extra debt, often at high interest rates, such as personal loans, which frequently results in ongoing financial pressure. This can also lead to a cycle of taking more debt to pay for existing debts, putting clients in a debt spiral.
What you as broker can do to assist
Your role as an adviser is to identify a funeral cover product that meets your client’s requirement for family funerals and takes their life stage and budget into account.
For clients in the lower and mass markets the 1Life Exclusive Plan offers cover for up to 17 members, with parents and parents-in-law covered at no extra cost and no maximum age. Clients in their 20s and 30s who have young families as well as parents and in-laws they want to cover on their policy, will find the premiums, starting from R122 a month, affordable. Optional benefits include grocery and wellness coupons as well as a legal assistance service. A benefit included in these plans is a repatriation service, so clients won't have to budget extra for this. 1Life's Family Plan caters for smaller families with cover for up to 12 additional members, these premiums start from R108 a month.
For lower and mass market clients with fewer budgetary constraints, products such as the Essential Plan offer flexible cover for up to 16 members, from R230 a month, with top up benefits such as a grocery, meat and transportation benefit and optional benefits that include grocery and wellness coupons as well as legal assistance. These products are suitable for married established families, with adults in their 30s and 40s and children of school age, who want cover for immediate loved ones as well as extended family members such as parents and siblings. However, if your clients are still young and in their 20s, single or just starting a family, they can consider products such as the Generational Plan, which covers a maximum of two children with premiums that start at just under R100.
While affordability is a real concern, the increase in premium for extra cover is unlikely to be as high as clients believe, and it is always worth preparing a quote so they can see the actual cost.
It is also worth comparing the price of more cover to the costs that could be incurred if the sum assured is not increased. For example, if your client takes a loan for R10 000 to pay funeral expenses, this could cost them an extra R642 a month for 24 months. Or your client may want a private burial plot, which increases the cost of the funeral. Nasrec Memorial Park offers a 24-month payment option for burial plots starting from R1 420 a month, for 24 months. If the price of extra cover is, for illustrative purposes, R40 a month, the higher premium becomes far more affordable than the loans and paying off burial plots over 24 months.
More affluent clients may opt for options that include life and funeral cover, such as 1Life Pure Life Plus, that offers funeral cover and life cover of up to R10 million plus a pay now death benefit. The pay now death benefit can be paid within 48 hours when the main member passes. A client in their 30s or 40s, with good standing in the community, children in high school and dependant parents, could afford an appropriate funeral and gathering, as well as giving loved ones financial security for years ahead with this option.
For some affluent clients affordability is not a concern and your role is to make sure they have enough cover to pay for the lavish funeral they want for their family.
You can talk to your 1Life Insurance consultant for more information and assistance on 1Life's funeral, and life and funeral products.
Help your clients review their cover today
Your clients can avoid the stress of finding funds to pay for a funeral as well as additional debts if the sum assured is enough to cover the costs of a respectable funeral. Help them review their cover amounts, in line with what funerals may cost, their needs, wants, budgets and life stage so that they can make informed decisions that will benefit them and their families.