Paying for your funeral

Making it easier for others

Funerals in Australia can cost anywhere from $4000 to $15,000 depending on whether they are simple or elaborate.

If you want to make things easier for your family by paying in advance for your funeral here are some options to consider:

How much does a funeral cost?

Most of us only find out about funeral costs when we need to arrange the funeral of a family member or friend.

Funerals can cost from $4000 for a basic cremation to around $14,000 for a more elaborate casket, burial and flowers.

Here are the typical items you need to pay for when arranging a funeral:

  • Funeral director fees
  • Transport
  • Coffin
  • Death certificate
  • Permits
  • Burial / cremation
  • Cemetery plot
  • Other expenses, such as a celebrant or clergy, flowers, newspaper notices and the wake

Find out more from ASIC's research report Paying for funerals: how consumers decide to meet the costs.

Super and other ways to pay for funerals

If you have super, when you die your super fund will pay out your super balance and any life insurance to your dependents or your estate. This money can be used to pay for a funeral but it can take some time for it to be paid out. Your family may need to pay for your funeral and then be reimbursed once probate is granted. Talk to your super fund to see what approach it takes. See super death benefits for more details. 

You may be entitled to funeral payments from the Department of Veterans' Affairs (DVA), your trade union, or your state or territory government. See DVA: Bereavement assistance 13 32 54 (1800 555 254 for regional callers).

A bereavement payment may be available through the Department of Human Services. See their webpage on what to do following a death or call 13 23 00 (1800 810 586 for TTY service).

In some circumstances (like if you have a terminal illness) you may be able to get hold of your super early to cover funeral expenses.  You may also be able to get your super early to pay funeral expenses of a dependant. Go to the Department of Human Services webpage on early release of superannuation or see getting super early for more details. 

Save for your funeral

You can save for your funeral by setting up a term deposit or online savings account and saving until you reach an amount that will cover the type of funeral you want. This could be all you need to do. You may find that you can save enough money to pay for your funeral this way.

Use our compound interest calculator to work out how long it will take you to save the money.

Compound interest calculator

 Keep these savings separate from your everyday accounts.

Make sure you tell your relatives about the accounts so they can access it when it is needed.

Pre-paid funerals 

Pre-paid funeral plans allow you to choose and pay in advance for your funeral. This is important if you have strong cultural reasons for wanting a certain type of funeral or certain features. If you want to pay for the funeral up front but don't want to be faced with all the details yet, you can pay for the funeral and leave the details for your relatives to decide later.

You should ask for a full description of the costs to see exactly what you are paying for. Funeral service operators who don't reveal the costs of a funeral are in breach of the Competition and Consumer Act 2010.

You can either pay for the funeral in full or pay it off in regular instalments over a period of time. A deposit is usually required but you can negotiate the amount you pay up front. 

It's important to shop around when you are looking for a pre-paid funeral as different funeral directors offer different packages.

Pros

  • Costs are fixed in today's dollars even if your funeral is not for many years
  • You can control funeral arrangements if you want to (such as casket, flowers etc)
  • You can pay in instalments over time
  • Can be a lot cheaper than a funeral bond or funeral insurance if you live for another 5-10 years

Cons

  • Can be inflexible if you move interstate to live with family. Some pre-paid plans are transferrable to different providers
  • If you change your mind about a pre-paid funeral you may not be able to get your money back. Check the terms and conditions.

Check for registration

Some states require prepaid funerals to be registered. The following state fair trading offices can help you with more information about prepaid funerals.  

Funeral bonds

Funeral bonds are an investment product that can help you save for funeral expenses. Funds can only be withdrawn after your death to pay for your funeral.

Money invested in burial plots, pre-paid funeral plans or funeral bonds (up to the Funeral Bond Allowable Limit) is not subject to the asset or income test for the Age pension. See the Centrelink's page on funeral bonds and prepaid funerals for more detail on how Centrelink treats these assets.

You can invest in a bond either directly through an investment company, such as a friendly society or life insurance company, or directly from a funeral director.

Many funeral bonds can be assigned to a funeral director of your choice.

You can pay for the funeral bond in instalments but make sure you understand all the costs before you sign up. You should read the bond's prospectus to find out the details. 

Case study: Alan gets a funeral bond

""When he decided to retire at 65, Alan wanted to get his finances sorted. Apart from sorting out his will and other paperwork, he wanted to make arrangements to pay for his funeral.

Alan didn't want to think about the details of the funeral itself so he decided to purchase a funeral bond with some of his retirement savings. He knew the investment would grow over time and if he lived another 15 years the bond would cover all his funeral costs. He was happy for his family to assign the bond to a funeral director of their choice at the time of his death. He felt satisfied that he had sorted out his funeral costs and his family would not have to worry about them.

Pros

  • Exempt from the asset and income test (the test used to assess eligibility for the Aged pension) 
  • Keeps funeral money separate from other accounts and investments
  • Good for people who want to pay in advance but may not want to think about all the details
  • As an investment, your savings will generally grow over time - check out investment returns and information about fees in the product disclosure statement (PDS)
  • You are not locked in to using a specific funeral director
  • You can buy your bond upfront or you can pay in regular monthly payments until you reach the chosen value of your bond. For example, for a $6,000  bond, you may need to pay a deposit of around $500 followed by monthly instalments of around $40 to $50 per month.

Cons

  • If you pay in instalments and die before the bond is fully paid for, you will only receive what you have paid into the bond and any money earned on the investment 
  • Investment returns on your bond may not keep up with inflation. (For example, if you invest in a $6,000 bond and die in 10 years and your funeral is $8,000, your family or estate may need to top up your bond to meet your funeral costs if the returns are not enough to meet the total cost)
  • Will not lock in the funeral costs in today's dollars
  • You may not be able to get your money back if you decide to discontinue the bond. Check the PDS.

Funeral insurance

Like other types of insurance, you pay monthly or fortnightly premiums (ongoing payments) for a fixed amount of cover. Usually you can choose between $5,000 to $15,000 cover which will be paid to your beneficiary when you die.

With funeral insurance, you are not saving for funeral costs but buying insurance to meet those costs at some future date. 

Unlike taking out insurance for a car accident which is an unknown event, we all know that we will die sometime. Because you don't know when you are going to die, you need to think about whether you can afford funeral insurance over the next 10, 20 or more years. 

Increasing premiums

Not only will you need to keep making payments over the years, but premiums usually increase with age and grow over time.

If the premium payments become unaffordable for you and you stop paying them, your policy is likely to be cancelled. You will not get back the money that you have paid towards your policy. Different insurers have different rules, so read the PDS carefully before you sign up. 

Things to consider

Before you buy funeral insurance, check whether it is worth the money.

Will you be paying more for the insurance than the funeral will actually cost?

Will your premiums increase and will you be able to keep paying them? Think long-term and remember if you can't keep up the payments you are likely to lose all the money you have paid towards the insurance. 

 

Case study: Alice gets funeral insurance

""Alice was 58 and still working when she took out funeral insurance costing $20 per fortnight. She wanted funeral cover so her family did not have to worry about paying for her funeral.

By the time Alice was 71, her premium had doubled and cost her more than $40 per fortnight. It had gone up every year as she aged and to cover inflation. She struggled to pay the higher premium on her much lower, post-retirement income. She also knew it would continue to go up each year. 

Alice added up all the premiums she had paid over the last 13 years and worked out that they had cost her more than $10,000.  

Alice had a tough decision to make. If she stopped paying the premium she would lose all the money she had already paid and if she died her funeral would not be covered. 

If she continued to pay her premium her funeral would be covered but she would not be able to afford the things she needed.

Alice realised that she wouldn't be in this situation if she had put the money into a savings account rather than towards funeral insurance. If she had saved the money she would now have enough to pay for her funeral and her fortnightly payments would have been available for her to cover her everyday expenses.

Your insurance premiums will go up over time. The PDS will tell you if your cover will also increase by the Consumer Price Index (CPI) or by a predetermined amount - which will result in your premium rising to cover the larger amount of cover. If you don't want your cover to increase you can usually opt out of this, but you must contact your funeral insurance provider. Check the PDS.

Pros

  • You can get cover from day one but most policies only cover accidental death in the first year or two
  • Insurance may seem familiar and affordable when you take it out and may suit you if you aren't sure if you can save for funeral costs

Cons

  • Premiums generally go up over time. This means what started out as a cheap way to pay funeral costs can become very expensive, especially if you are living on a fixed income
  • If you can't afford to keep up the premiums or want to cancel your policy you are not likely to get back the premiums that you have paid
  • If you live another 5 to 10 years you may end up paying more in premiums that the cost of the funeral. Visit the My Longevity website to work out your life expectancy
  • As most insurers only cover accidental death in the first 2 years, if you die from a terminal illness in this time you may not be covered. Check the policy's terms and conditions.
  • Sometimes it can take a while for your family to receive the insurance payout to cover funeral costs.

Your own funeral can be hard to think about, but if you want to sort it out in advance, make sure you check out your options to get the best value for your money.


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Last updated: 15 Jul 2015

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