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07 Jul 2021

Funeral Insurance sometimes gets a bad rap, often due to misconceptions and misinformation about how funeral insurance works and who it’s designed for. We’re here to de-bunk some of the most common myths about funeral insurance, and help you learn more about how funeral cover works and decide for yourself if it could work for your family. 

Myth 1: You don’t need funeral insurance if you’ve got savings in the bank

Here in Aotearoa we’re known for our “she’ll be right” attitude. Sometimes we can sit back and trust that everything will all be taken care of – no worries mate. But the reality is planning and financing a funeral can be incredibly stressful for a lot of families, even if that headache is felt behind closed doors.

You never know what’s around the corner or what sort of financial stress your family could be under when the time comes. Life has a way of keeping us on our toes, and as our families grow, move, change jobs or buy properties, their financial situations change. Funeral insurance is one way to protect your family from the unexpected, removing financial stress at an already difficult time.  

Sometimes even people with savings in the bank need funeral insurance, to tide your loved ones over until your funds can be released from your bank accounts. That’s because if you pass away with more than $15,000 to your name, the funds may not be able to be paid out until probate or letters of administration have been obtained, which can take some time – and in the meantime, your family will need to find the funds to pay for the funeral through other means, whether that’s dipping into their own accounts or applying for a loan – or funeral insurance. 

At Cigna we’re proud to be able to help families out straight away, when they need it most. Once we’ve received the claim forms, the funeral cover payout is usually in your loved one’s bank account within 48 hours.

Myth 2: You can only use funeral insurance for funeral related costs

 It’s all in the name … right? Funeral insurance is for funeral costs. Well it turns out that this one’s a myth too. With funeral insurance you can nominate a beneficiary to receive a one-off tax-free lump sum payment into their own bank account. Once it’s paid the money’s all theirs, so it’s their choice how to spend it.

Of course many families choose to primarily use the payment to help with the costs of the funeral, as the cost of funerals in New Zealand can be high – the average funeral costs $8,000-$10,000. This could include expenses like the funeral director fees, casket, burial fees or any special cultural or religious requirements your family has. It could also include related expenses like travel and accommodation for family travelling from out of town attend the funeral. 

End of life traditions and wishes look different in every culture and family, so you may want your funeral insurance pay-out to be spent on helping your family take time off work to grieve or making a contribution to a charity close to your heart. Whatever you and your family decide, the choice is yours to make.

Myth 3: Funeral Insurance is expensive

 If you’ve heard the myth that funeral insurance is expensive, there’s an easy way to test it for yourself: get a quote and compare the cost of funeral insurance for yourself. It only takes a few minutes, and all you need to provide is your age, gender and smoking status.

It’s helpful to remember that you can decide how much you pay for your cover, and choose a cover level that balances affordability with your loved ones’ needs. With Cigna you can choose anywhere from $5,000 to $30,000 worth of cover.

Although many of us would like to leave our family with the highest level of financial support possible, it’s more important to pick a cover level that you’ll be able to afford: not only today, but well into retirement as well. Sometimes that means compromising and picking a lower cover level, so you don’t have to overstretch yourself now to take care of the family in the future.

There’s also a few ways to make it even cheaper. The sooner you take out funeral cover, the lower your premiums will be for life. This is because the fixed premiums are based on the age you are when you take out the cover, however you may pay more over time based on how long you live and when you take the cover out. If you have a partner or family member looking to get their funeral cover sorted out, you could also consider taking a joint policy out for the 20% joint discount. It’s also cheaper for non-smokers, so if you manage to quit smoking for 12 months, get in touch to talk about how to reduce your premiums. Our friendly team are here five days a week to work with you to find options that work for your budget.

Myth 4: You’ll be asked a lot of intrusive health questions

With Cigna, you can set up a funeral insurance policy online or over the phone in as little as five minutes. There’s absolutely no medical questions or complicated paperwork, because your health won’t affect the cover we can offer you. Your acceptance is guaranteed with Cigna Funeral Cover – we don’t turn anyone away or deny them cover because of their health or medical issues. To be eligible, you just have to be a New Zealand resident aged from 50 to 80 years old.

The way it works is you’re covered for death caused by accidental injury from day one of taking out the policy. After 24 months, you’ll be fully covered for any cause of death, whether that’s from an accident or natural causes.

To make sure your loved ones get financial support, regardless of what happens, we also refund all the premiums you’ve paid towards your policy to your loved ones if you pass away due to sickness or health issues during the first 24 months of your policy.

Myth 5: Your money is safer in the bank

 You can rely on us being there when the time comes: we’ve paid out 100% of Cigna Funeral Cover claims since 2015.

Just like banks, insurance companies are carefully regulated to make sure they’re financially secure and will be able to fulfill the promises they make. All insurance companies are required by law to share their financial strength rating which is given by an independent specialist rating company. These ratings help you make an informed decision about how safe the company is. You can view our current financial rating here and learn more about how this rating is measured.

There are also some risks that come with leaving some money set aside in the bank. Some of us find it tempting to dip into savings, whether that’s to indulge in life’s little luxuries or cover unexpected expenses that crop up. When that happens it can be hard to build the savings account up again.

There’s also the risk you’ll pass away sooner than expected. If you were to save $25 a week for 10 years, you’d end up with over $13,000 – but if you were to unexpectedly pass away after only one year, your family would have just $1,300 to support them.

With funeral insurance you pay a small amount each month for a pay-out of a guaranteed amount to your family – regardless of how long your policy’s been in force for (just remember there’s a 24-month wait period before you’re covered for death by natural causes).

With funeral insurance you can have the confidence that money is always set aside for your funeral when the time comes, no matter what your bank balance is looking like. 

Myth 6: Funeral Insurance is the same as a pre-paid funeral

If you guessed that this one’s a myth too, you’d be on the money. A pre-paid funeral is when you lock in your funeral arrangements ahead of time with a particular provider. You can decide what type of service and casket and you’d like and plan any catering or special requests like music, songs, photos or readings.

One downside of picking a provider in advance is it may be more difficult to change the plan as your needs change – or if you decide your prefer a different provider. With funeral insurance, you and your loved ones can keep your options open about which provider and services are right for your family.

Another key difference is that with insurance, you’re covered straight away for accidental death, and for death by natural causes after only 24 months. With a pre-paid funeral, your family will only be able to access what you’ve been able to contribute. If you’ve been contributing a little towards a pre-paid funeral each month, if you pass away sooner rather than later, there may be a significant balance left to pay. Cigna funeral insurance can give you the security that whenever it happens, enough money will be there for your family. 

Myth 7: You will spend more in monthly premiums than the cover pays out.

Well … maybe. In some cases, a funeral cover pay-out could be less than the total amount of premiums paid, but in many cases the pay-out could be significantly more. Insurance is intended to cover the unexpected or the worst-case scenario: that you may pass away sooner than you’d like to think. It’s great for people looking to take control and remove the guesswork of trying to predict the future.

One way we look after our customers here at Cigna is we stop charging premiums at age 90. This means you can have certainty about the maximum amount you’d possibility pay towards your cover – while knowing you’ll have full cover after only two years. And if you do pay a little extra in premiums? That could be a chance to celebrate beating the statistical odds and living a longer life.

If you are young and in good health, and worried about paying too much in premiums, it could be worth talking to an Insurance Adviser about a Cigna life insurance policy or looking at other family life insurance options. Unlike funeral insurance, life insurance premiums take your health into consideration – so you may find it works out cheaper than funeral cover if you’ve got a clean bill of health.  

So there you have it

Before you make your decision it’s important to separate the fact from the fiction. Every family’s different but there’s a few reasons why so many Kiwis choose funeral insurance to leave a legacy for their loved ones.

Just like with anything it’s important to take the time to do your own research to figure out what options are right for you and your circumstances – but if you have any questions, sometimes that’s a good time to call in the experts and get some professional advice.

Keep reading about Cigna Funeral Cover to learn more about if funeral insurance if right for you or a family member or get in touch with an Adviser today.