Life Cover -vs- Funeral Cash Plan
If you need cash to cover end of life expenses no matter when and or where it happens then you need a funeral cash plan.
If you are a breadwinner and need a lump sum paid on death as income replacement or to pay off debts like a mortgage, then consider taking a Life Cover.
Our advice is that we all need both funeral cover and life cover. One is not a substitute for the other.
Funerals are not cheap especially diaspora funerals. Diaspora death can widely be defined as death in diaspora or death of a diasporan’s close family member back home; both situations require immediate financial resources to cover costs, namely:
- Casket or coffin
- Local transfer or transport
- Repatriation or reverse repatriation
- Food and drinks
- Family travel
- Church service
- Photo + videography
- Household bills like electricity
- Shipment of the deceased’s personal effects
- Memorial service
- Tombstone ceremony
- Lost revenue due to funeral
Funeral Cash Plan, as the term alludes to, is a final expenses policy structured to pay out CASH to take care of any end-of-life expenses. Diaspora Funeral Cash Plan is designed to pay out cash, not to provide funeral director services. This guaranteed cash pay-out gives bereaved families the flexibility to use the money for anything because people’s needs, location, choices, and preferences tend to be dynamic and fluid over time which should be matched with a versatile cash policy because cash knows no borders.
The biggest advantages of Diaspora Funeral Cash Plan over a life insurance are that the funeral cash plan offers:
- Very streamlined sign-up process,
- You can add your loved ones on the cover,
- Guaranteed acceptance,
- No intrusive medical underwriting at all, on application nor claim,
- Cover for life unlike term life cover which can expire before you die, and
- Guaranteed benefit pay-out on claim, unlike a life cover where a claim can be rejected for non-disclosure
- Immediate cash pay-out on proof of death.
The Diaspora Funeral Cash Plan is not a substitute for life cover, if anything they are complimentary policies. The funeral cash plan is meant to meet a specific need, that is, to provide immediate financial intervention on death and alleviate financial challenges that immediately arise. This guarantees you or your loved ones a dignified send off.
|Feature or Benefit||Funeral Cash Plan||Standard Life Cover|
|Guaranteed Acceptance||Yes||No – its subject to medicals|
|No Medicals on application||Yes||No – its subject to medicals|
|Cover your loved ones||Yes||No – you can only add spouse unless its keyman insurance|
|Cover for Life||Yes||No – on term life covers but Yes on whole of life cover|
|Free Cover In Future||Yes||No – on term life covers the only stops on claim, cover lapse or expiry and on whole of life cover the premiums continue for life|
|No medical on claim||Yes||No – subject to medical and checking for things like non-disclosure|
|Guaranteed pay-out on claim||Yes||No - subject to medical and checking for things like non-disclosure|
|Immediate pay-out on claim||Yes||No - subject to medical and checking for things like non-disclosure.|
|Guaranteed to cover end of life expenses covered||Yes||No – Assuming that burial happens within a few days of death|
|Maximum Cover Amounts||$/£/€20k||Up to US$ millions|
The main purpose of life cover is not to pay for funeral expenses because it rarely pays out in time for the funeral unless one is prepared to stay in a mortuary for months waiting for life policy proceeds. But then where is the closure? Life cover is mainly an income replacement policy for breadwinners with financial dependents or a debt redemption policy for those with loans like a mortgage. In other cases, life cover can be used for tax planning or to leave a cash lump sum for your loved ones.
The two main reasons why a life cover is not a funeral policy is that if its term then there is a high chance that the policyholder will outlive the policy and secondly, medical underwriting on claim means that pay-out is not guaranteed and even when successful it may not be in time for the funeral. Whilst some life covers come with a nominal funeral expenses benefit as an additional free benefit the challenge remains that on expiry the funeral expenses benefit also expires.
Do I Need Both Life Cover and Funeral Policy?
The simple answer is YES because the two policies protect you against different needs. The table below shows the different protection needs, the ideal cover and how it pays out.
|Your Protection Need||Best Cover||Benefit Pay-out|
|Funeral Expenses||Funeral Cash Plan||Tax-free lumpsum|
|Breadwinner Income Replacement – lumpsum||Life Cover – normally level term||Tax-free lumpsum|
|Breadwinner Income Replacement – monthly benefit||Family Income benefit||Monthly tax-free payments|
|Debt Redemption||Life Cover – normally decreasing term||Tax-free lumpsum|
|Inheritance Tax||Whole of Life Cover||Tax-free lumpsum|
|Lumpsum inheritance to loved ones||Whole of Life cover||Tax-free lumpsum|
|Loss of Income – injury or illness||Income Protection Cover||Monthly tax-free payments|
|Loss of Income – injury or critical illness||Critical Illness Cover||Tax-free lumpsum|
|Terminal Illness||Life Cover with Terminal Illness Cover||Tax-free lumpsum|
|Medical expenses||Private Medical Insurance||Private Hospital Medical Services|
|Loss of Income – Accident, Sickness or Unemployment||Accident, Sickness or Unemployment (ASU) or Mortgage Payment Protection Insurance (MPPI)||Monthly tax-free payments normally up to 24 months maximum|
|Loss Of Income – hospitalisation||Hospital Cash Plan||Daily tax-free payments|
Protect yourself, protect your family, protect your dignity it’s your responsibility.