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This was published 4 months ago
When living longer means getting no value for funeral insurance
By Anna Patty
The longer Gill and Alan Brown live, the worse value for money they will get from their funeral insurance. They will need to pay more than $50,000 before they are old enough to qualify to stop paying monthly premiums.
The couple has so far paid $21,500 for a $9500 benefit to cover the cost of each funeral. As morbid as it sounds, they would need to take advantage of the policy now to come close to breaking even.
Gill and Alan Brown will need to pay more than $50,000 in funeral insurance premiums before they qualify to stop paying.Credit: Joe Armao
If Gill gets to the age of 89, the insurance policy will allow her to stop paying monthly premiums. By then, she and Alan will have shelled out another $30,000 on top of the $21,500 they have already paid. Gill, 75, expects inflation to keep pushing up the $130 monthly premium needed to maintain her $9500 funeral benefit. That’s on top of rent.
“I don’t think I’m getting any value,” she said. “There are funeral people around now that are offering cheaper funerals.
“My husband and I don’t want anything exotic. I know we can be cremated for about $3500 each, which is our preference.”
Gill signed up for the funeral insurance policy in 2003 after seeing it advertised on daytime television.
“I was vulnerable,” she said. “I was recovering from pneumonia and the ads were running continually. I thought this doesn’t sound too bad.
“I thought if anything happens to me, I’ve got four children, I best put something away.”
When she asked the insurance company if she could stop paying her premiums and get her $21,500 back, she was told she “would lose the lot”.
A spokesman for Insuranceline, which provided the funeral policy, declined to comment on the Browns’ policy for privacy reasons.
‘I was vulnerable ... I was recovering from pneumonia and the ads were running continually. I thought this doesn’t sound too bad.’
Gill Brown
“A customer is able to claim on our funeral insurance policy at any time after the policy commences, and in the vast majority of cases this means the premiums paid by a customer are less than the benefit received,” the spokesman said. “We have a range of support options available for customers whose circumstances have changed including assistance for customers who may be facing financial difficulty. We encourage customers to contact us to discuss these support options as we are committed to helping where we can.”
Consumer Action Law Centre lawyer Philippa Heir said funeral insurers had targeted vulnerable pensioners on daytime television ads.
“A lot of people tell us they take it out when they had a health scare or someone close to them pass away, so it’s often at a very vulnerable point in their lives,” she said.
“The people contacting us have been in policies for years and years and some have already paid more than the benefit, and they still have to pay thousands of dollars in ever-increasing premiums until age 90 or whenever the policy ends or if they pass away.”
Mark Holden, a solicitor from the Financial Rights Legal Centre in Sydney, said one of his NSW clients had a funeral insurance policy before she received unsolicited calls from two other insurance companies. They signed her up for two additional policies she did not need.
The centre helped her cancel the two extra policies, which she’d been duped into buying, and negotiated a partial refund for her remaining policy.
Holden said many vulnerable people had received unsolicited calls, and were signed up for funeral insurance on the spot before agreeing to any written terms. Some clients had been duped into thinking they had a “pseudo life insurance policy”. Clients often signed non-disclosure agreements that prevented them from speaking to the Herald.
“Funeral insurance is a junk insurance product,” Holden said. “It’s got the lowest payout rate and highest cancellation rates. We have clients who have paid more than twice what the policy is worth. It is actually easier to pay these contributions into a savings fund.
“The only way that funeral insurance would have any benefit would be if you were to die in five years time because if you pay beyond that you are likely to pay more than what the benefit is worth.”
In 2018, the Hayne royal commission into banking exposed systemic rorts in the funeral industry, where insurers paid out only about one third of the premiums collected. The commission called on the corporate regulator, the Australian Securities and Investments Commission, to shut down junk funeral insurance after it found Indigenous consumers were disproportionately affected.
Holden said many consumers were still unaware of their rights under policies they have held for many years.
Claude Von Arx, a financial counsellor from the National Debt Helpline, said his pensioner clients were renting and struggling to put food on the table. “They can’t get out of it because they don’t want to lose what they’ve put in.”
Peter Grainger, 65, from Whittlesea in Victoria, said his funeral insurance premiums had more than doubled from $36 to $82 per fortnight since he took out his policy ten years ago. So far, he has paid out more than $15,000 for a funeral benefit that is worth $11,500 each for him and his wife. But he is struggling financially to pay his bills and regrets taking out the policy.
“I’ve had such a bad run lately,” he said. “If I can get my money back – I’d be better off saving the money I reckon.“
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