Planning ahead for funeral costs

You may have seen those ads on TV telling you how affordable a funeral plan can be. They say you can put money aside now to make it easier for your family later. There are a number of ways you can pay for a funeral, but not all of them will be suitable for you.

Before you buy a funeral product, check if you already have some kind of funeral cover. If you have superannuation or health insurance these may include a life insurance policy which will pay a funeral or death benefit. If you decide to put more money away for a funeral, there are a few different options.


One of the easiest ways to pay for a funeral is to set up a savings account so you can save as much as you want, when you want. If you put away $20 each fortnight then you would have over $1,000 after two years. Importantly, with a savings account you don’t lose your money or your cover if you stop making payments.

Funeral insurance

Buying funeral insurance will mean regular ongoing payments. But it’s important to remember that insurance is not savings. If you miss a payment then your policy will usually end. You won’t get back what you’ve already paid, and you’ll no longer be covered, so your family won’t receive a pay-out when you pass away.

Before buying funeral insurance you should ask:

  • For how long will I need to make payments? If the policy requires regular payments until you pass away, you might pay a lot more than the amount your family will receive.
  • Are there circumstances where they won’t give a pay-out? E.g. if you pass away 12 months after signing up, will the policy pay out any money to your family?

Funeral bond

A funeral bond is a bit like putting money in the bank. All the money – plus any interest earned – will go to your family to help pay for the funeral. But it’s important to look at the costs and features, and be aware that there will be different rules with different companies.

Find out if you have to pay a certain amount upfront, how much the fees and charges are, and when you have to pay them.

Pre-paid funeral plans

This option allows you to pay for your funeral in advance through your funeral director, and you can choose the type of funeral you want. You can either pay in full, or you can pay a deposit and then regular payments over time. The payment plan can only be for three years at the most.

Your payments don’t increase over time, and you pay for the funeral at today’s price – even if the funeral is another 30 years away.

If you are likely to move house – maybe interstate – check if your plan can be transferred to another funeral director. Ask if there will be a transfer fee. If you don’t transfer your contract when you move interstate, and your funeral director is unable to provide the service, then the money will be paid to your estate.

Funeral directors are not allowed to look after your money themselves. They must give all payments to an investment manager, who must then invest the money in an approved investment. Your money is kept safe, even if the funeral company goes out of business.

For more information

See the pre-paid funerals factsheet or visit the MoneySmart website. If you have any concerns about a funeral product, contact Consumer and Business Services on 131 882.