Can you use life insurance to pay for a funeral?
The financial responsibilities that come with organising a funeral can get stressful. Even with lockdown having changed how we conduct funerals, having a funeral policy in place can help ease the strain.
But what happens if your loved one did not have funeral cover in place and, instead, life insurance? Will you be able to use the life insurance payout to cover funeral expenses? Here is what you need to know.
How life insurance works
Life insurance is a policy that pays out a lump sum to the people who have been listed as beneficiaries once the policyholder has died. The amount can be used for a range of things, such as paying off debt that the deceased may have accumulated, educational fees, daily living expenses, bond payments or in any way the beneficiaries see fit.
Built-in funeral cover
It is possible to get a life insurance policy that comes with a built-in or accelerated funeral cover that can help loved ones cover immediate funeral expenses. This feature allows you to claim 10% of the total available life cover amount to cover funeral-related expenses.
For example, if your loved one has no funeral cover but has a life insurance policy to the value of R500 000, and it comes with an accelerated funeral cover benefit, you will be able to claim 10% of it (R50 000) upfront. Keep in mind that there could be a waiting period that varies from insurer to insurer, which can be between 24-48 hours.
Things to consider
Understanding how the claim process works and the exclusions that come with the policy is vital. Not only will it make the process smoother for the beneficiaries to receive the payout, but it can help reduce the stress.
One of the things to consider is the waiting period that differs from funeral and life insurance policies. While funeral covers have a waiting period of 24-48 hours, it could take a longer turnaround time for the life insurance cover to pay out.
When you place a claim for a life insurance policy, insurers will investigate to ensure that there was no foul play and that the policyholder died from natural causes or by accident to prevent fraudulent claims.
The investigation is done to check that the premiums for your loved one were up to date before passing. The payout time will differ from insurer to insurer. This can be a disadvantage if there was no funeral policy in place. Therefore, having life insurance and a funeral policy is advisable.
Find out if having funeral cover is enough here. Having a funeral cover such as the MiWayLife's 4-in-1 policy gives you value for your money by covering you beyond the funeral expenses. Always remember to ask your insurer to clarify any information you may not understand and carefully read what has been included in the terms and conditions of a funeral or life insurance policy. Informing your loved ones about the policies in place can prevent your policies remaining unclaimed when you die.