Here’s what you need to know about the risky funeral insurance industry
Over 30,000 Australians have a Funeral Benefit with APS, giving them peace of mind knowing that their families won’t have to burden the cost of their funeral one day. As a non-profit, bonuses are paid to members which further increases their benefits each year.
But a funeral benefit is very different to funeral insurance.
Funeral insurance does not act as a savings plan. Funeral insurance is an insurance policy whereby you pay a regular premium and a lump sum is paid to your beneficiaries to cover funeral expenses. It sounds simple, but there are many underlying issues within the industry with thousands of Aussies unfairly exploited by their funeral insurance provider.
The problem with funeral insurance
One of the key risks with funeral insurance is that customers generally need to continue to pay expensive premiums until they pass away. If someone with a funeral insurance policy finds themselves in financial hardship and can no longer pay the premiums, they will lose everything they have invested. Premiums generally increase as policyholders age, which can make them more expensive over time, leaving many pensioners in an extremely unfortunate position.
The other major concern with funeral insurance is that customers typically don’t get back the premiums they pay. The 2018 Hayne royal commission into banking revealed that funeral insurers paid out only about one-third of the premiums collected. The royal commission also uncovered that Indigenous consumers were unfairly targeted by various funeral insurers. In 2022, the collapse of Youpla/Aboriginal Community Benefits Fund resulted in about 30,000 Australians losing millions of dollars in premiums.
Vulnerable Australians are getting ripped off by funeral insurers every day and more often than not, when customers sign up for funeral insurance they don’t understand the policy and the dangers involved.
The future of the funeral insurance industry
Many people are calling for further investigation into the funeral insurance industry and more regulation from the government so that fewer people are caught up in the dangers of these policies. It is difficult to determine how much more these funeral insurers can get away with, but we strongly encourage you to closely examine what you are signing up for when it comes to insurance.
If you are in the process of considering funeral insurance, we highly recommend seeking alternative options such as an APS Funeral Benefit. Your membership will provide you with greater peace of mind, knowing that you, your family and your loved ones are in trusted hands – no sketchy premiums, mysterious terms and conditions or exit fees.
Learn more about APS Funeral Benefits.
