Pre-paid funeral vs. funeral insurance

A pre-paid funeral (sometimes called a funeral plan) allows you to plan and pay for your funeral ahead of time at today's prices, either through a lump-sum payment or instalments. 

Funeral insurance pays a lump sum benefit to your family when you pass away regardless of how much you’ve paid or how long you’ve held the policy for. Other covers may also apply that would pay the benefit to you, such as the diagnosis of a terminal illness.

While both options can be a handy way to help take care of funeral costs, they can work out rather differently depending on your plans and financial position. It’s a good idea to speak with your family or a financial adviser to understand how each option could help. 

This table compares a typical pre-paid funeral option with OneChoice Funeral Insurance. Keep in mind that every funeral insurance provider is different so we can’t speak for the rest.  Most pre-paid funeral plans are organised by the Funeral Directors Association of New Zealand (FDANZ). 

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OneChoice Funeral Insurance Pre-paid funeral
Payout Fixed amount between $3,000 and $30,000, which is paid to your family or nominated beneficiaries regardless of premiums paid1 Can be as much or as little as you like, depending on the type of funeral you want to have. Your contributions are transferred to a trust account which accrues interest. Any difference between the actual cost of your funeral and the amount you’ve paid, (plus interest) is returned to your estate
Can be used for Funeral costs or anything else Funeral costs only
Eligibility New Zealand residents aged 18–79 are guaranteed acceptance No restrictions to set up
Medical/blood tests required No No
Tax implications2 Benefit amount is usually tax-free in New Zealand You may be required to pay tax on any earnings over the amount you paid.
Trustworthy Yes Yes

Pros and cons of funeral insurance and pre-paid funeral plans

Both funeral insurance and pre-paid funerals can be suitable options if you’re concerned about the cost of your final farewell. Make sure you consider your personal needs before making a decision as each option comes with its own advantages and disadvantages.

Pros of funeral insurance 

  • The benefit amount is paid as a lump sum and can be used however you or your family decide, like paying for your funeral costs or other end-of-life expenses (outstanding debts, legal fees etc.)
  • Simple and easy to apply for cover
  • Some policies offer extra cover for accidental serious injury, accidental death, or cover for diagnosis of a terminal illness

Cons of funeral insurance

  • Your chosen benefit amount may not be enough to cover the future cost of a funeral, either due to inflation or change of circumstances 
  • Total premiums could potentially exceed your benefit amount 

Pros of pre-paid funerals

  • The cost of your funeral is locked in at today’s prices, regardless of the future cost of funerals
  • You make arrangements for your funeral in advance, so your family doesn’t need to make these decisions at a difficult time
  • Any leftover funds after the funeral will go back to your family or estate
  • Some providers may also help document your final wishes 

Cons of pre-paid funerals 

  • Benefit can’t be redeemed for cash or any other purpose if your needs change
  • Only accessible when you pass away.

OneChoice Funeral Insurance charges no premiums for your policy after you turn 85.

Other ways to pay for a funeral

If you’re not feeling either of the above options, there are still other fish in the sea. You can also pay for a funeral using: 

  • your personal savings 
  • a Funeral Grant from Work and Income (Te Hiranga Tangata) if you’re eligible3
  • favours/donations from your friends or community – don’t be ashamed to ask for help!

Read more about options to pay for a funeral > 

Take it slow

While it’s always a smart move to plan ahead, don’t rush into it. You should make a decision after speaking to your family/whanau and considering all the available options. Getting some personalised financial advice from an expert can’t hurt either.

Whichever option you go with, we’re here cheering for you to have the best funeral possible. It’s the least you deserve after the performance of a lifetime.

  1. The total amount of premiums payable over the life of the policy has the potential to exceed the cover amount. 
  2. This article is for general information purposes and shouldn’t be considered or relied upon as professional or personal advice. If you have legal, tax, or financial questions, you should contact an appropriate professional.
  3. Funeral Grant - Work and Income New Zealand

Make the call

If you’re keen for a chat, call us on 0800 640 004 from 8am to 8pm Monday to Friday. If you’re too busy enjoying life, we can call you instead, or why not request a quote now?