What is funeral insurance?

Funeral insurance basics

Funeral insurance is a financial cover for your family to pay for funeral costs or other end-of-life expenses after you pass away. It can also cover you for major setbacks like a terminal illness or accidental serious injury. That means you’ll not only be helping your family during a tough time, but you’ll also have a plan B in case your own life takes a wrong turn. Not a bad deal!

Citizens Advice Bureau says that funeral insurance is one option to help pay for funeral costs, using the money from a claim.¹

Unlike most insurance products, funeral insurance covers an inevitable outcome. Some of us can go a lifetime without using our car or health insurance but we’ll all need a funeral eventually. While most of us prefer not to think about it, planning your funeral and how it will be paid for ahead of time could save your family a lot of hassle and financial stress, as organising things on short notice can be tricky. Besides, planning your own farewell gives you the chance to make it all about you — whether you want a lavish festival with a rugby theme, or just something simple that reflects your life.

How does funeral insurance work?

You apply forfuneral insurance
1
- Choose the cover amount that works for you
- Get a quote
Insurancecompany
2
- Assesses your application and advises if cover is approved
- Issues funeral insurance policy
- Covers the life insured under the terms of the policy
Insuranceevent
3
- Claim is submitted by the claimant
- Claim is assessed by insurer
- Lump-sum payout made to the beneficiary or estate (to you for a terminal illness or accidental serious injury claim if applicable) within 1-2 business days of receiving required paperwork

In exchange for a fortnightly, monthly, or annual premium, funeral insurance pays out a set amount of money (known as the ‘cover amount’ or ‘benefit amount’) when you pass away or face another mishap covered by your policy. The benefit is the amount you choose when you apply for cover (generally capped at $30,000) which is generally paid to you within 1-2 business days after the required paperwork and forms are provided.

Your estate or your nominated beneficiaries will get the full benefit amount for an eligible claim, regardless of how long you’ve held the policy, as long as the policy is active when the insured event occurs.

The application process is usually seamless — you may be asked a few questions about your health and lifestyle, but many providers offer guaranteed acceptance if you’re a New Zealand resident and within the eligible age bracket. Winning!

Your level of cover

In New Zealand, most providers offer cover up to $30,000. The minimum amount is usually around $3,000. The higher your cover amount, the higher your premiums will be. While funerals can be expensive, it all comes down to how much you’re willing to spend on your closing act. You might want to read up on some of the expected costs of a funeral or tangi to help you figure out a suitable cover amount.

It's also worth considering any other immediate costs your family could face when you’re gone. If you have any personal debts or are worried about legal fees poking into your estate and will, you may want to consider this when calculating your level of cover.

Premiums vs. payout – understanding what you’re paying for

Premiums can be stepped, meaning they increase each year with age, or they can be level premiums, meaning they don’t increase automatically each year. Consider which type of premium structure suits you. It’s possible with a funeral insurance policy to end up paying for more than you actually use, as your total premiums paid over the life of your policy could exceed your final benefit amount. That’s why it’s really important to balance your level of cover with the premiums you could pay over time.

It’s important to remember that funeral insurance isn’t a savings plan. You’re not only paying for your expected benefit amount, but also the comfort of knowing that the money will be available right when it’s needed. Plus, some providers offer extra benefits to help you fix even more of life’s dings, such as cover for an accidental serious injury or diagnosis of a terminal illness.

If you’re not sure about how much cover you could need, you should chat to a financial adviser as well as your family. And don’t forget to ask them about the final payout from funeral insurance as this is usually tax-free.

Get up to $30,000 to plan life's closing act.

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What does funeral insurance cover?

Generally, funeral insurance covers you for death, but you may also be covered for certain illnesses or injuries. Some policies also have added cover for your children or spouse.

A funeral or tangi can be expensive. You can expect to pay around $10,000 for a standard service and up to $15,000 or more for something a little fancier.² Funeral insurance is designed to help your family plan the perfect send-off without worrying about how to pay for the costs getting in the way.

Breakdown of funeral costs

To see how funeral insurance could help, it’s good to be aware of the typical costs you might expect when planning a loved one’s curtain call. Keep in mind that these figures are estimates only and will likely vary depending on the service provider.

Item	Estimated cost ^{3 4 5}
Burial plot	$2,740 (Christchurch) – $6,000+ (Auckland)
Cremation and internment	$695
Coffin/casket	$2,500
Headstone	$1,000
Embalming	$700
Digging fees	$1,108 – $1,860
Death certificate	$33

You’ll also need to factor in other costs like:

flowers
catering
venue hire
transporting the deceased
estate and legal fees.

Life insurance compared to funeral insurance

Life insurance is a type of insurance policy that also covers you for death, but keep in mind that there are a few differences between life insurance and funeral insurance.

Life insurance is an underwritten product, typically used to protect your family’s long-term financial future if you passed away unexpectedly. You can get a payout of up to $2 million depending on your age and the provider you choose. Some policies also have an advanced funeral payout to help with sudden funeral costs while your family’s claim is being assessed.

Slide to compare >>

	Life insurance	Funeral insurance
Benefit amount	Generally from $100,000 up to $2 million (depending on your age)	Generally up to $30,000 (may not be capped by age)
Claim processing time	Once the insurer receives all required documents and information needed to assess a claim, generally you will receive a decision within 15 business days.	Generally paid within 1-2 business days from the receipt of all documentation required to assess a claim.
Approval criteria	Underwritten product so health and lifestyle questions and/or medical screening may be required.	Many providers offer guaranteed acceptance for New Zealand residents aged 18–79.
What the payout may typically be used for	Immediate funeral costs Paying off debts or making ongoing payments e.g. mortgage, personal loans, credit cards Children’s education fees Lifestyle adjustments after a death or medical impairment Supplementing lost income if the main provider passes away	Immediate funeral costs Estate/legal fees Paying off small personal debts the deceased may have had

In the end, it comes down to your personal goals and situation as well as eligibility for which product you choose. Have a look at OneChoice Funeral Insurance and OneChoice Life Insurance to see whether they might be worth considering.

Why not?

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What you get with OneChoice Funeral Insurance:

Your cover, your way

Don’t settle for cover that doesn’t fit right. With OneChoice Funeral Insurance, you can choose a level of cover that works just for you, from $3,000 up to $30,000.

Guaranteed acceptance for New Zealand residents aged 18 – 79

Just ask. We won’t say no. There are no medicals or blood tests needed either.

Fast payout to your family

We pay most claims within 1 business day after receiving the required paperwork. When it’s time for a funeral or tangi, your loved ones can focus on honouring your memory — not paying for it.

Happy 85ᵗʰ birthday

You’re only 85 once, so for reaching the big milestone, we’ll add 25% Bonus Cover to your policy at no additional cost.

No more premiums after age 85

Keep the celebration going, as you’ll no longer have to pay to stay covered (hip-hip, hooray!).

Cover for terminal illnesses

Be ready for life’s curveballs with your benefit amount paid in full if you’re diagnosed with 12 months or less to live (cover is for accidental serious injury and accidental death only in the first 12 months).

Level premiums with no annual increase

There’s no guesswork with OneChoice. Your premiums won’t go up every year¹ so you know exactly how much you need to pay. You can’t get a refund on premiums after the cooling-off period – sorry.

Triple benefit for accidental death

If life catches you by surprise, your loved ones will receive a triple payout of up $90,000. It’s our way of helping you expect the unexpected.

Early Cash Out Option

If you’d rather go your own way, you can end your policy any time after you turn 85 and get 75% of your benefit amount paid to you — no hard feelings. Keep in mind that this payout won’t include Bonus Cover, and you’ll no longer be able to claim as this option will cancel your policy.

Guaranteed cash payout for an even happier 100ᵗʰ birthday

At age 100, we’ll end your cover and give you 125% of your benefit amount to spend any way you like. Not a bad way to celebrate the last century.

Triple benefit for accidental serious injury

You’re covered until the age of 75 if you suffer an accidental serious injury and we’ll triple your benefit amount (up to $90,000). Use it for medical bills, recovery costs, or to turn life’s lemons into lemonade.

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