Insurance companies sometimes offer additional benefits along with their funeral policies. These benefits can be optional or built into your cover. But do you know what these benefits entail?
Justmoney spoke to industry experts to help us unpack some of them.
Tip: Give your loved one a dignified funeral. Get a funeral cover quote here.
- Premium waiver benefit
"If a certain event happens and you have a premium waiver benefit, your policy continues for a specified period of time and you don’t have to pay any premiums during that time,” says Mareli Man, head of product development and pricing at Metropolitan.
The events covered could be the death, disability, or retrenchment of the policy owner. Some products even offer a premium waiver on the policy owner reaching retirement age. The premiums could be waived for a limited period of time, or for the duration of the policy.
For example, let us say your policy includes a premium waiver in the event of death. If you pass away, your policy will continue without any further premiums being required, allowing your family members to continue to enjoy the peace of mind of knowing that their funeral is covered.
According to Andrew Codd, Divisional Executive for the Emerging Consumer Market at Liberty, the waiver benefit is only relevant when there are additional lives covered.
“The rules vary from insurer to insurer, especially on how long the remaining cover stays in place – it could be for a few months, up to retirement, or for life,” he says.
- Cash-back benefit
According to Codd, this benefit rewards customers for keeping their policy going and continuing to pay their premiums.
It typically pays out an amount of money at regular intervals if you pay your premiums on time.
Man points out that the amount that will be paid to you as a cashback usually depends on either the cover level that you chose or on the size of your premiums. The benefit is usually built into the policy, but can sometimes be optional.
You may forfeit your cashback if you claim on your policy or don’t pay your premiums on time.
- Premium holiday
A premium holiday – also called a “premium skip" – is an automatic benefit that provides flexibility for the customer when experiencing difficulty in paying premiums, says Cobb.
This feature allows you to miss some premiums without any reduction or suspension in cover.
Cobb says rules will vary by insurer, but a typical scenario would allow you to accumulate a premium holiday annually up to a maximum of six.
For example, after three years you could skip three premiums without any negative impact on the policy benefits.
The devil is in the detail
You need to consider the details of each benefit when deciding on its value.
According to Man, you must keep in mind that your premiums are set taking these included benefits into account. That is, they come at a cost, and you may be able to pay a cheaper premium if you remove the benefit.
A premium holiday is usually an automatic benefit and the flexibility is almost always going to be useful, but the workings of the holidays can vary by insurer, says Cobb.
For instance, with some insurers, you’re only allowed one holiday a year. If you don’t take advantage of it, you lose it. While with others, unused holidays accumulate every year up to a maximum amount.
A premium waiver is usually a slightly more costly benefit so you would need to decide whether additional insurance is affordable and needed, says Cobb.
This could be done by assessing the price of this benefit when it's optional, or comparing prices across packaged products when it's built in.
You must be careful when it comes to cashbacks.
According to Cobb, the regular cash-back benefits are not expensive and they are usually automatic – often after 5 years. However, there are bigger, optional cash-back benefits, such as all premiums paid back – for example after 15 years.
These require significantly higher premiums as the product includes a savings benefit – so you are paying for the funeral benefit, and then an additional amount to pay for the premium refund.
When deciding on the benefits that you want on your plan, make sure that the benefit will really meet your needs and that you can afford the higher premium.
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