Life Cover or Funeral Cover - The either-or-both conundrum

While funeral cover and life insurance are not competitors in the technical sense, in the context of South Africa’s unique and complex socio-economic makeup, consumers often confuse the two products. “Funeral vs Life Cover; should I have one or both?” is a question frequently addressed in the media, such as a recent article in IOL’s Personal Finance.

Both funeral cover and “life insurance” as they are referred to in the article, are life insurance cover in nature but are distinct in the value of cover that one can obtain and their respective terms and conditions which differ vastly. Funeral cover involves simplistic underwriting factors, because only the death of a person is covered, normally with a waiting period of 6 months, to exclude anti-selection by the insured. Underwritten life cover, as is stated in the article, takes many more factors into account and the underwriting is complex. The duty of disclosure of an insured is also much more onerous and detailed, to ensure that the risk and premium, as well as exclusions are correctly done, for example, pre-existing medical conditions.

In South Africa, many cannot afford underwritten life cover, so there is a healthy appetite for funeral policies in the market. Even though funeral cover is simple in nature, individuals who take up such insurance must still ensure that they understand what they are buying, such as whether the person whose life you are insuring, is allowed. Given cultural differences in South Africa, there are many different views on who is considered close family members – and these beliefs of view may not mirror the terms of policy and the legalities. It is always recommended to speak to a qualified professional before you take the leap. Because, if you realise there’s a problem when claiming, it is, most often, too late to rectify it.