5 ways to pay for your funeral

1. Does your life insurance policy cover funerals?

Check your life insurance policy to see whether it will pay for your funeral.

Life insurance policies generally come in two types: whole life insurance and term life insurance.

Term life insurance usually has other benefits, such as funeral cost cover or terminal illness cover. If it does, check the fine print to see if cover stops once you reach a certain age. Some policies stop cover once you reach 60 or 70 years of age.

For more information, check out How to buy life insurance - Consumer NZ.

2. Funeral insurance

Our research into funeral insurance found it to be poor value for money.

Based on quotes for $10,000 of funeral cover for a 64-year-old, we calculated you could pay anything from 10% to 100% more than the policy was worth by age 84.

Another fishhook is that if you can’t afford to keep up payments or want to cancel, there’s generally no refund.

If you are looking at a funeral policy, check the lifetime costs of the insurance so you can see whether you’ll end up paying more than the policy is worth.

3. Save for your funeral

Rather than take out an insurance plan for your funeral, open a savings account and put some money aside every week, or when you can.

Talk to your bank about why you want the account, and make sure someone in your family knows it’s there and can access it.

Banks can pay for the funeral bill from your account before the estate is wound up. They will need to see the death certificate and the invoice from the funeral home and will pay the bill directly.

Find out how much a funeral costs and what the role of a funeral director is at: The cost of dying - Consumer NZ

4. Prepaid funeral plans

You can arrange for a prepaid funeral directly with a funeral home.

Most funeral homes that are members of the Funeral Directors Association are aligned with The Funeral Trust, to hold your money until it’s needed. However, other funeral homes may have their own trust arrangements and different terms and conditions.

The benefit of a prepaid funeral is that you’ll be able to contribute lump sums or regular payments to your prepaid funeral when you can.

And, because it’s arranged via a funeral home, you’ll have a realistic idea of the cost of the funeral you want, so you can work out how much you need to pay.

Regardless of the funeral home you choose for your prepaid funeral, check the terms and conditions to see whether any fees apply. Once you put money into the trust, you may not be able to withdraw it unless you’re in significant financial hardship.

Also, ask what happens to the money if your preferred choice of funeral home goes out of business, or if you or your family decide to use another funeral service.

Any money left over from the funeral should be paid out to your estate.

Prepaid funerals up to $10,000 are excluded from asset testing for the residential care subsidy if they’re held in a recognised funeral plan. However, tax may apply to any interest accrued.

Other prepaid funeral trusts are offered by trustee companies, like the Public Trust, and some law firms. These trusts will usually have some administration fees. However, the money isn’t tagged to a specific funeral provider.

5. Where to get help to pay for a funeral

Work and Income

You may be eligible to get financial help to pay for a funeral with Work and Income, but it will depend on your income and assets, as well as the income of the person who has died.

The most that will be paid out is $2,559.20.

More information about funeral grants is available on the Work and Income website.

ACC

If you’re arranging the funeral for someone who has died from an injury that ACC covers, you may be able to get some money to help with costs.

A grant of up to $7,491.95 can be paid towards funeral and memorial costs.

Financial support is also available for families of murder or manslaughter victims, and for those left behind by a death.

More information about the payments is available on the ACC website.