Funeral Insurance vs. Prepaid Funerals: What’s the Difference?

Planning for your funeral is often avoided because it can seem overwhelming. But getting organised can make it easier for your nearest and dearest, when the time comes. Read on to learn about the difference between saving up, funeral bonds, funeral insurance and pre-paid funerals.

Rachel Hechtman Rachel Hechtman
ARTICLE3 MIN READ
Funeral Insurance vs. Prepaid Funerals: What’s the Difference?

The “circle of life” means all of us will deal with death at some point in our lives. Both our own death as well as the death of our loved ones. Death is a difficult topic for many of us to think and talk about and for this reason, is often pushed aside. However, a little forward thinking and planning ahead means we can eliminate much of the stress and financial strain of arranging a funeral service by taking out funeral insurance or arranging a pre-paid funeral.

The difference between funeral bonds, funeral insurance and a pre-paid funeral

Although funeral bonds, funeral insurance and pre-paid funerals can all achieve the same goal, they do so in distinctly different ways. Understanding the difference between these options options will not only help you decide which one is best for you, but may also save you thousands of dollars.

Funerals typically come with a fairly hefty price tag. The average cost of a funeral can be anywhere between $6,000 and $15,000. That’s a lot of money, especially if you hadn’t planned for it. Funeral costs incorporate the fees of the funeral director, coffin, transport, death certificate, cremation (if desired) plus any required permits if the burial will occur at a special location. Additional expenses may include a celebrant, flowers or a wake.

Saving for a funeral

A very simple approach to saving for a funeral includes setting up a separate basic savings account at a bank and topping up the account on a regular basis. However, this means the money remains an asset of yours which may in turn impact some government payments you'd otherwise be entiteled to. These days, there are far superior ways to minimise the financial and emotional strain of arranging a funeral.

Funeral bonds

A funeral bond is a down payment on a funeral with recurring monthly payments over time. A funeral bond allows you to pay for your funeral in advance without worrying about the details. Although you can have tough conversations with family about what you want at your funeral, they don't allow you to incorporate funeral wishes as part of the paperwork.

Funeral insurance

Funeral insurance works in a similar fashion to other insurance policies you might have. Regular, premium payments are made up until the time of claiming. At the time of passing, a pre-agreed sum of money is paid out to your beneficiaries so that they can pay for the funeral.

The main drawback of funeral insurance is its long term cost. When one calculates the total cost of funeral insurance over the lifetime of the policy, you might find the total amount paid out to you exceeds the total amount you've paid over the lifetime of the policy. Inflation also increases premiums over time as does increasing age so many older Australians may find it difficult to afford their premiums when no longer working and living on reduced income. Another point to consider is if you miss a payment, you run the risk of having your premium policy cancelled with no option for a refund.

In the past, funeral insurance was the most common approach to prepare for life’s uncertainty. However, these days there are more options available and Australians are now turning to Prepaid Funerals as their preferred means of arranging their funerals in advance.

Pre-paid funeral plans

On the other hand, a pre-paid funeral plan allows you to purchase and plan your funeral details in advance. When purchasing a pre-paid funeral plan you have the opportunity to liaise with a Funeral Arranger and plan the type of funeral or service you want. All the details including music and flowers can be pre determined by you. So, by purchasing a pre-paid funeral plan, you get to decide how your life is remembered and how you would like to say goodbye. 


When selecting a pre-paid funeral plan, you are paying for the funeral at today’s prices. This could equate to substantial savings when one considers the financial impact of inflation over time. There are two main options when purchasing a pre-paid funeral Plan - upfront or monthly instalments. It’s reassuring to know that once the funeral has been paid in full, there is no more money to pay. Additionally, unlike funeral insurance, the pre-paid funeral instalment amount never increases over the duration of your plan, so there are no surprise fee increases along the way.

Wrap up

Planning for the future is one of the best things you can do to support your loved ones. Arranging a funeral in the time immediately after a loved one has passed can add to the stress and trauma of what is already taking place. There are two things you can do to ease the burden; You can note your funeral wishes in your legal Will, and you can speak to the team at Willed about how you can prepay your funeral today.

Disclaimer: The content of this blog is intended to provide a general guide to the subject matter. This blog should not be relied upon as legal, financial, accounting or tax advice.

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