Funeral insurance warning – is it worth the premium paid?
Funeral insurance warning – is it worth the premium paid? | Insurance Business Australia
Insurance News
Funeral insurance warning – is it worth the premium paid?
Chief executive calls for reform of the sector
Insurance News
By
Mia Wallace
The CEO of Tasmania’s No Interest Loan Scheme has warned that the funeral sector needs reform amid a consumer’s ongoing challenges.
In a report from ABC News, it was revealed that Rowena Sweeney took out funeral insurance in order to ensure that her home would not be sold to pay for her service. She said she feels trapped into paying funeral insurance, having paid $88 a month for funeral insurance for herself and her daughter for over a decade.
The funeral payout will be $15,000 each and Sweeney estimates her insurance has cost her $10,000 so far.
“If I cancel I lose everything,” she said.
As a result, the 60-year-old has decided to continue paying funeral insurance until her death. ABC News noted that her insurance company, TAL, will stop charging her premiums when she turns 90.
“I am trapped in this until I am 90, then that is (another) $30,000 in premiums. Or $40,000 in total,” she said. “I do feel a bit ripped off. It is quite an extraordinary amount for what you receive.”
While Sweeney said she felt swayed by television advertising to sign up for the insurance, she did clarify that the advertisements came with warnings, with the fine print details suggesting consumers consult a financial advisor.
Sweeney’s daughter – who is in her early 30s – will also have to keep paying the insurance until her death to secure her $15,000 payout.
ABC News reported that a spokesperson for insurance company TAL said it could not comment on individual customers but highlighted that funeral insurance was valued by customers who could not pay up-front for a pre-paid funeral.
“We take great care to ensure our customers understand that products they are purchasing from us are insurance products and not funeral savings products, which are different,” the spokesperson said.
“Insuranceline has a range of options available to support customers who may need help, including ongoing premium affordability, and we encourage all our customers to contact us to discuss these options to see where we can assist.”
Funeral insurance reform
The CEO of No Interest Loan Scheme Tasmania, John Hooper, has said that funeral insurance needs reforming.
“It’s just not fair,” he said. “If they pull out of their funeral arrangement because they think it is a rip off and then they do pass away a fortnight later, even though they might have spent $10,000 or $20,000 [in payments] … they’re not covered. That’s just not right.”
In the ABC News report, Hooper said he had clients coming to No Interest Loan Scheme Tasmania seeking a loan to help pay for a funeral but the maximum his organisation could lend was $2,000. He noted that funeral costs can be near $15,000 and while his organisation can help with part of that, it’s still a heavy cost for consumers.
Hooper said he is worried about how people pay the difference, raising concerns that they might go to a more predatory cash lender or a pay day lender where those rates will just increase astronomically.
“We get really worried about people paying more than they need for a loved one’s funeral because their grief gets a bit exploited by the process,” he said. “Your parent doesn’t want you to go broke trying to put on a good show for them.”
Kelly Scott from the Australian Funerals Directors Association noted that the cost of a funeral was usually decided by the family and depended on what they chose.
“The cost of funerals does not need to be out of reach,” she said, urging families to stick to a budget. “Don’t be afraid to ring around, don’t feel this isn’t something you should be getting quotes on. Take your time, there is absolutely no rush, make sure you make those decisions as clearly as you possibly can.”
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