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What's the difference between Funeral and Life Insurance Cover?

Considering the need for insurance cover and weighing up the costs can be an overwhelming time for many people. Certain insurances, that take care of your loved ones when you’re no longer around (such as Life Insurance and Funeral Insurance), can be particularly unsettling for many people to think about.

This blog post will help to explain why you might need life insurance or funeral cover, understand the key differences between insurance types and answer some commonly asked questions.

Let’s start by understanding a little more about Life Insurance.


What is Life Insurance?

A Life Insurance policy will vary from provider to provider, but generally they allow you to take care of your loved ones when you’re gone. If you have people who depend on you financially, Life Insurance offers them (and you) some comfort that your debts can be covered. Life Insurance can also offer your dependents the peace of mind of not needing to work immediately if something was to happen to you.


What does Life Insurance cover you for?

Life Insurance is intended to cover your family for major life events. Common triggers for people to start thinking about their responsibilities include buying a house, getting married, or starting a business or family. These are decisions where your death may have a significant impact on your nearest and dearest.

A Life Insurance policy may ensure you’re covered for these major life changes, or that any ongoing debts that you currently service are covered if you’re not around. It’s easy to get caught up in the excitement of buying your first house or financing a business. But all too often, a reality check about the insurance cover you need is at the bottom of a long To-Do list.

Life Insurance policies can be used to pay off debts including mortgage repayments, schooling and business loans, or a lump sum payment to your estate, this will ease your families financial burden.


Do I need Life Insurance?

At certain times in your life, the importance of Life Insurance will be higher. For example, when you first buy a house, your mortgage payments are likely to be at their highest. This is a great time to consider a Life Insurance policy so that your loved one’s aren't left with unrealistic mortgage repayments if you are no longer around to help pay the debt.

If you’re starting a family, you might consider a Life Insurance policy as a way to cover schooling and childcare, if you were to pass away unexpectedly while your children were still young. This article is a good read for new parents getting their heads around their new responsibilities.

For more general information about why you might want to consider Life Insurance for you and your family, check out this Stuff article.

Importantly, Cigna’s Life Insurance policies enable you to change your cover depending on your life stage and circumstances.


Who is Life Insurance best suited to?

Life Insurance cover should be considered for people with young children, ageing parents or life partners that rely on them for income security. Life Insurance is also a good option for people with significant debt levels, whether that be a mortgage, a business loan or credit card debt. It can be difficult to think ahead to the future when you’re focused on your day-to-day routine of caring for your children or in-laws, or trying to prioritise that personal loan repayment.

Some life insurances have an inbuilt funeral policy or cover to help with those one-off, end-of-life expenses such as funeral, medical and legal costs.

With 450,000 Kiwis choosing Cigna to take care of their loved ones, everyday New Zealanders are certainly wanting to give their dependents peace of mind.

There is some useful information in this post about financial considerations that may impact your Life Insurance cover.


Cigna Life Insurance claims and your Estate

A Life Insurance claim with Cigna is simply made by calling or emailing the Cigna Claims team and completing the claim form. Life Insurance policy claims will require a death certificate, Cigna policy details and probate or legal documentation. Initial claim assessments are made within five working days.

In some cases, it can be possible to make an advance claim if the insured person is diagnosed with a terminal illness.

Advanced funeral payouts are also available, where the policy owner of your estate can receive a portion of your cover to cover immediate end-of-life expenses while your claim is being processed.

The payout would go to the executor of your estate as outlined in your will, which is why it’s essential to write a detailed will and keep it updated, especially if your circumstances change with life events such as growing your family, or paying off your mortgage.


So, what is Funeral Insurance?

Funeral Insurance (or Funeral Cover) can help make the difficult time of a loved one dying, financially easier for those left behind. You can ease the burden of funeral expenses for your family, by applying for Funeral Insurance and paying a monthly fee (or premium) for your funeral cover.


Do I need Funeral Insurance?

Consumer NZ estimates that funerals in New Zealand cost $10,000 on average. It is important to note that low income families can apply for a funeral grant from Work and Income NZ of just over $2,000, but for other families, these expenses are difficult to pay for at short notice.

A death in the family isn’t easy for anyone. Sometimes it can be difficult to think rationally, and amongst all the funeral decisions needing to be made, mounting funeral bills are the last thing you need to worry about. .

If your family is likely to find it difficult to meet funeral expenses in the unexpected event of your death, Funeral Insurance is a way you can help to alleviate unnecessary stress.


Who is Funeral Insurance best suited to?

Funeral Insurance is a simple solution for people worried about the emotional and financial impact their passing away may have on their family. Having a funeral plan in place is a simple gesture you can make to your loved ones.

A Cigna Funeral Cover Insurance policy is available for New Zealand residents aged between 50 and 80 years of age. Depending on the type of funeral you want to have, cover is available from $5,000 to $30,000.

You’ll be immediately covered for Accidental Death, and fully covered after 2 years of having your policy with Cigna, with your premiums refunded if you pass away from natural causes in the first two years.


Cigna Funeral Cover Insurance Claims and Beneficiaries

You can be assured of prompt payouts on your policy claim. Cash payouts are usually made, direct to your nominated beneficiary within 48 hours of your claim forms and other documentation being received and your claim being accepted.

A Funeral Cover Insurance claim with Cigna is simply made by calling or emailing the Cigna Claims team and completing the claim form. Funeral Cover Insurance policy claims will require a death certificate, Cigna policy details, proof of your nominated beneficiary’s identity and a copy of your will, and the team are happy to help out with your loved one’s claims paperwork, especially as this can seem overwhelming if you're grieving or upset.

A Nominated Beneficiary is the recipient of the benefit payable under your Funeral Cover Insurance policy. A Nominated Beneficiary must be 16 years of age or over, at the date they are nominated. You can choose more than one beneficiary too – it may make sense to nominate all of your children, so they can share the financial load. You can find more information about nominating beneficiaries here.


Comparing Life Insurance and Funeral Insurance

Choosing Life Insurance or Funeral Insurance will depend on many factors, including your life stage, financial obligations, number of dependants and the level of comfort you want to extend to your partner or other dependents.


Your life stage

If you’re under 50 years, a Life Insurance policy may be more applicable. You’re more likely to have financial obligations you would want covered (mortgage and personal loans), and are more likely to have dependents (for example children and ageing parents). The flexibility of dialling your Life Insurance cover up or down depending on your changing circumstances means your insurance premium is tailored for you and your family’s needs.

If you’re over 50, your debt obligations may be lessening, giving you less reason for Life Insurance, unless you have dependents still relying on your income. You may be concerned about how your immediate family will cope with meeting your funeral expenses though.


Your health

Some Life Insurance policies take into account your ongoing good health, with discounted premiums for 'healthy living’. There are some benefits of taking out a life insurance policy when you’re younger, as you’re typically healthier and more likely to pay less in premiums. Unlike Funeral insurance, Life insurance is usually underwritten, meaning your insurer will tailor a policy for you that’s based on factors like your age, medical history and personal lifestyle. Younger people can often enjoy Should you be diagnosed with a terminal illness, you may be able to access an early pay out to assist with your treatment or caring for your family. Imagine what a relief this could be for your loved ones at such an overwhelming time.

Cigna’s Funeral Insurance offers guaranteed acceptance, regardless of your health, medical history or lifestyle. Funeral Cover Insurance policies ensure you’re immediately covered for Accidental Death and fully covered after 24 months. It is worthwhile noting that if you were to pass away from natural causes within the first 24 months of your policy, a Cigna policy will refund your beneficiary with 100% of the premiums you’ve paid.


Your lifestyle

In order for your partner, parents or children to maintain the lifestyle they currently enjoy with your income, life insurance could help supplement this, should anything happen to you. Our simple calculators can help you work out what you owe, assess your end-of-life costs and how much ongoing income your family will need to maintain their lifestyle.

It’s amazing how much the simple pleasures can add up. A holiday every year, a contribution to your children’s tertiary education, household grocery and utility bills, and ensuring your home loan is paid off in full.


Do you need both Life Insurance and Funeral Insurance?

This very much depends on your personal situation. Funeral Insurance has lower cover and premiums, and claims have a prompt turnaround which is helpful at a difficult and emotional time. It may also be an option for people with health problems who find it difficult to obtain life insurance due to medical reasons, and who want to ensure their families will not be burdened with funeral costs. Generally, this cover is suited to older people with less disposable income.

Life Insurance policies offer you flexible cover that you are able to scale up or down depending on your life stage and financial commitments. Although premiums tend to be higher, a Life Insurance policy can often offer you additional benefits, such as early payout for terminal illness. If you have reliable income and value plus peace of mind that Life Insurance can offer, this type of cover might be a better option for you.


Choosing the best insurance option

Know exactly which insurance cover you need? Great, you can apply now for an instant quote: Life Insurance quote or Funeral Insurance quote.

Not quite sure? Our Life Insurance Calculator can help you decide on the best options for your situation. Our team is always happy to talk through your options, using a thorough needs analysis, to arrive at a cover level that suits you, your life stage and family. Contact us today on 0800 900 047 or schedule a call with one of our friendly specialists.

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