Paying For A Funeral In Australia
With the cost of a funeral usually within the $4000 to $15000 mark, paying for a funeral can be a heavy financial expense. To help ease the burden of funeral costs, it is recommended that you put together a payment plan after reviewing all the options.
Whether you’re looking to pay in advance or cover an immediate cost, there are a number of options available.This guide outlines all the available organisations and resources within Australia that can assist you in paying for a funeral.
A pre-paid funeral is a simple option that allows you to design and pay for your service in advance. Working with a suitable funeral director, you’ll go through the process of choosing your ideal service. After deciding on all of the funeral options, you will be given a quote, which can either be paid in full or in instalments.
Advantages of Pre-paid funerals
- Have your say: A lot of people want the control and comfort of pre-planning their own funeral, leaving nothing up to interpretation. This involves sitting down with a funeral director and figuring out all the details of the ceremony. It can also provide a sense of relief to the family left behind, who may not know what funeral decisions to make.
- No costs for family: With the cost of a funeral so expensive, having a pre-paid funeral arranged ensures no financial burden is left with relatives.
- Today’s prices: The amount you’re quoted is based on today’s prices and will not rise in the future. Therefore you’re basically locking in a fixed price. So with the price of a funeral going up every year, you will probably end up saving a lot- especially if the funeral takes place in more than five years.
- Income test: A pre-paid plan is not subjected to an income or asset test, meaning it won’t affect the level of your pension entitlements.
Disadvantages of Pre-paid funerals
- Could be unaffordable: Can be expensive to pay off in the short term.
- Complicated if you move: If for some reason you move interstate, there maybe an issue moving the pre-paid plan to a different funeral director.
- Difficult to get a refund: It maybe difficult to get a refund if you change your mind or are unable to cover the full cost of the pre-paid funeral.
Funeral bonds (Also known as funeral investments) are another way to save money in order to meet future funeral expenses. Money is placed in a managed fund where it earns interest over time. It is invested securely under strict guidelines, and can be only withdrawn at the time of death in order to pay for funeral costs.
Advantages of Funeral Bonds
- Flexibility: You don’t have to decide on any funeral director or ceremony when taking out the bond. So if you just want to make sure there’s enough money to cover funeral expenses, this may be an ideal option.
- Can be separated: Funeral bonds can be kept separate from your other assets such as bank accounts, superannuation, and investments.
- Won’t affect pension: Funeral bonds are also not subjected to income or asset test, meaning it won’t affect the level of your pension entitlements.
Disadvantages of Funeral Bonds
- Doesn’t protect from inflation: Unlike pre-paid funerals, you’re not locking in today’s funeral prices. So there’s a possibility that the price of a funeral may rise more than the interest you’ve made on the bond.
- May not cover all costs:If you pass away before making all the necessary instalments, the money and interest earned on that bond may not be enough to cover all funeral expenses. In which case, additional money would need to be used from other places.
- Risk of low return: Like any investment, there’s a risk of not getting a substantial return. The dividends could be less than other options like a term deposit account.
With funeral insurance, you pay ongoing premiums (either fortnightly or monthly) in order to cover funeral expenses in the future. With this type of option, you select how much cover is needed (usually in the range of $5000-$15000) and then pay the appropriate premium. At the time of death, the amount of cover selected will be paid out to the beneficiary.
Advantages of Funeral Insurance
- It’s familiar: The concept of funeral insurance is easy to understand and is familiar to most people, mainly because it’s similar to other types of insurance.
- Quick payouts: Costs will be taken care of immediately after death.
- Easy to buy: The process of getting funeral cover is easy and fast.
Disadvantages of Funeral Insurance
- Premiums will rise over time: With most funeral insurance companies, the premiums will rise over time. So if you’re paying these premiums over a long period of time, they may become too expensive.
- No refunds:If you do stop paying the premiums for whatever reason, both the cover and previous payments will be lost.
- Premiums greater than funeral costs: If you live for a long period of time while paying for funeral insurance, the premium costs may be greater than the actual cost of a funeral.
Other insurance policies
If you need to organise a funeral immediately, it’s a good idea to find out whether the deceased any existing insurance policies (Other than the most common forms listed above). Some policies like health and life insurance will make direct contributions to the cost of a funeral. Contributions are not guaranteed and will ultimately depend on the type and level of cover. Find out what policies the deceased had at the time of death, and then make enquires with those insurance companies to see whether you are entitled to any contributions.
If the deceased has any superannuation, the remaining funds plus any life insurance entitlements (Also known as death benefits) can be used to cover any funeral costs. However the process of transferring any benefits to the trustee can take some time (possibly months), while funeral costs need to be paid immediately.
If you need to claim death benefits to cover the cost of a funeral, get in contact with the deceased’s superannuation fund as quick as possible. They will inform you of the process of how to go about filing a claim.
Deceased’s bank account/estate
If the deceased had sufficient funds within their bank account at the time of death, it may be used to pay for expenses such as funeral costs. This can be a fast and uncomplicated solution compared to getting the deceased’s estate to cover any costs. A good idea would be to go to the deceased’s bank to find out how much money is available and whether it’s possible to pay for any immediate expenses.
While a more complicated and longer process, paying funeral expenses with the deceased’s assets is a common method. However the only issue is that these costs usually need to be paid well before the estate has been settled. Therefore someone will usually pay the costs in the short term and then be reimbursed later by the estate. If you do need to cover any funeral expenses, make sure you keep a clear record of what you’ve paid for.
A bereavement payment can be made by Centrelink to help families in need of financial assistance. This usually comes in the form of a lump sum payment, which goes towards any funeral expenses. Assistance is most common in the situation where both partners had been receiving Centrelink benefits. Centrelink can also approve the early release of superannuation funds in to cover expenses. To find out whether you qualify or see what options are available, get in with contact Centrelink as soon as possible.
Department of veteran affairs
When the person who passed away was a veteran, there is extra help that can be given out to families. The Department of Veteran Affairs will give up to $2000 (check with most recent amounts, as they can change) for each veteran who served for their country. If a veteran loses their spouse, there can even be benefits for families who are in a challenging financial situation. To get more information or see whether you qualify, have a look at the information provided on their website.
If the person belonged to any social clubs or trade unions, there could be some funds allocated to help families pay for funeral costs. Contact each club or organisation to see if they might have a fund set aside, or would be willing to help start a small fundraiser in honour of the deceased.
Aboriginal land council
Members of the Funeral Fund for Aboriginals of NSW and CLC who have memberships are given a certain amount of grant (up to $5,000), in order to cover the cost of a funeral. If the person was not part of this membership, which is now closed, a family can may still be able to apply for a grant from the organisations each year which can offer $1,000 per person of Aboriginal descent. Contact the Aboriginal Land Council for more details.