The issue of funeral policy provider’s grossly overcharging consumers, has dominated news in the last year or so, but according to First National Bank (FNB), consumers are still not aware that they are unnecessarily paying more.
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FNB Life estimates that 35% of all FNB customers have more than one funeral plan to cover themselves, and are thus effectively paying up to 30% more than necessary.
Lee Bromfield, CEO of FNB Life, stated: “Having multiple funeral policies makes funeral cover more expensive as each insurer factors in their expenses when calculating your funeral plan premium.”
“For example, if you have funeral cover worth R10 000-00 with two different insurers, they would each be charging you R35-00 per month, costing a total of R70-00 per month. However, if you combine the two policies and only take out a single R20 000-00 policy, you would only pay around R49-00 per month.”
Bromfield further pointed out a few of the reasons as to why multiple funeral policies are not a good idea:
- Over extending budgets – “Having too many policies stretches your budget in tough economic conditions, increasing the risk of defaulting on premiums. An individual that defaults on three policies may find it difficult coping with double debit orders the following month, increasing the risk of the policies lapsing,” said Bromfield.
- Increases the payout times – It would take longer for your family or beneficiaries to claim from multiple insurers in the event of you passing away. This is because insurers generally have different claims processes and requirements.
- Unclaimed benefits – “Every year many insurance policies go unclaimed because the families or beneficiaries don’t know about the policies. Having multiple policies increases the chance of policies getting lost,” Bromfield explained.
- Cover limits across policies –Some insurers impose restrictions on the maximum amount of cover that can be claimed for, across their policies. “Therefore, having multiple funeral policies with the same insurer could result in your beneficiaries only being able to claim a portion of the benefits if your total cover exceeded the insurer’s limit,” iterated Bromfield.
- Managing policies – Managing too many policies may prove to be a handful, especially when it comes to the admin of keeping beneficiary details up to date and remembering various debit order dates.
“Although the intention may be good, consumers that are currently struggling to make ends meet should avoid the mistake of unnecessarily paying more for premiums. You can still ensure that you have a dignified funeral with only one policy,” added Bromfield.
To understand the difference between funeral cover and life insurance, click here.