What is Funeral Insurance?
Funeral Insurance can be a number of things. It’s essentially a life insurance policy that pays out on death, with the sum being used to cover some or all of the funeral costs and expenses.
Some policies exist purely to pay funeral expenses, such as the policy historically offered by the Credit Union.
However, in recent years, the amount payable by this cover has reduced to a level that’s insufficient to cover the cost. This payment can be between €1,300 and €2,600, usually, although it depends on individual credit unions.
How much does a Funeral cost?
Funeral costs can run across a spectrum, where the location of the funeral can matter as much as the type of funeral you or your family will choose.
To put the credit union payment into context, an average coffin can cost €1,500; an average funeral can cost €4,062, but this doesn’t include the ceremony or burial/removal; a burial plot can cost €1,908, but this varies dramatically depending on location; cremation, on the other hand can cost between €527 and €770.
Holy Hell! Funerals cost this much?
Unfortunately so. Let’s say, like a lot of people, your main asset is your home. You might have some money in the bank, but would your family be able to access these accounts in moments?
Your savings might be great right now, while your still working, but average life expectancy in Ireland is now 81, and a lot can happen between now and then.
Sometimes it’ll be roof repair, but other times it’ll be cruises. You never know.
What are my solutions to cover funeral expenses ?
Bank of Ireland will allow for payments to be made from your account directly to the funeral director.
Your family will need your account details to fill these claims forms, and you’ll need enough available funds in the account to pay these expenses.
AIB allows for a payment of €5,000 for funeral costs, which as we saw above, may not be enough.
The alternative is that your dependents may end up having to find the resources to pay for your funeral themselves, and wait until your estate has been settled to recover this money.
The probate process in Ireland can currently take up to 48 weeks, or even 500 days. So it can take one to two years before family members can recoup funeral expenses if your estate is asset-heavy and cash-poor.
Seriously? Probate takes how long? Also, what’s probate?
Probate is the judicial process of validating a deceased person’s will. It’s the first step in administering the person’s estate, and resolving all claims to it.
It’s a ridiculously lengthy process, and it can be even more complicated in the case of those who don’t have wills. As many as 7 in 10 people in Ireland have no will at death, also known as ‘dying intestate.’
In these cases, the estate is distributed in line with the Succession Act, 1965. This act provides for very specific divisions of the estate, so if you would have preferred your partner to to get sole ownership of your house, for example, your partner would receive half of your share, with the remaining quarter to be divided between your children.
Depending on the value, they would then be liable for inheritance tax on this, when this could run contrary to your intentions.
How do I make sure my policy doesn’t get tied up in probate?
The best way is to have a specifically named beneficiary on the policy. Otherwise it goes to your estate.
In this way, if the policy is for Funeral Insurance, the beneficiary can apply to the insurance company directly for the payout, without waiting for probate to be concluded.
As this policy is specifically for the purposes of paying for funeral costs, make sure that the beneficiary is aware! Depending on their relationship to you, there may also be an inheritance tax liability.
John wants an insurance policy for his funeral expenses, for €13,000. He can either assign this to his wife Sinead, his son Larry, or his brother Eric.
|1. Policy assigned to his wife Sinead?||1. There’s no inheritance tax between spouses.|
|2. Policy assigned to his son Larry?||2. Children have a tax free threshold of €320,000, so he won’t have an immediate tax liability, but the €13,000 will need to be taken into account for any additional inheritance.|
|3. Policy assigned to his brother Eric?||2. Eric, as a sibling has a tax free threshold of €32,500, so again, no immediate liability, but the €13,000 will be more significant to Eric in respect of any other inheritances.|
Funeral Insurance Solutions
Ugh. Okay. So what are my options?
Although several products are marketed as ‘Funeral Insurance’, these are life insurance policies, in that they pay out on your death. So the question is, what type, and what terms do you need?
Figure out how much you’d like your family to have access to in the event of your death. You’ve seen the average cost of a funeral above. Equally important is the choice between burial and cremation.
Once you’ve selected your estimate figure, the next factor involves your age. If you’re still in your 50s, with no other health issues, you could get a whole of life policy on quite favourable terms.
Keep your pension arrangements in mind too. A term policy in case of emergencies for 15 years, until you retire at 66, for instance, would pay for a funeral before any lump sums were available.
whole-of-life Life insurance (non-medical) policy
Finally, if you’re under 75, but have some health conditions, a whole-of-life (non-medical) policy might be your best option.
These policies are often specifically marketed as funeral policies. As the medical questionnaire is very limited, the access to this policy is very broad.
They can be very easy to get, but will usually be more expensive than a policy underwritten specifically for you.
Contact us to discuss your funeral insurance requirements now