Funeral insurance: how it works and whether it's worth it
Funeral insurance pays your family a fixed lump sum when you die, meant for funeral costs. Moneysmart says the usual choice is between $5,000 and $15,000 of cover, paid for with ongoing fortnightly or monthly premiums.
It is sold as simple and affordable, but Moneysmart's own summary is blunt: funeral insurance can cost you a lot more than the benefit your family will receive, and if you stop paying you lose what you have already paid. For many people, especially those already in their 50s or 60s, a funeral bond, a prepaid funeral or plain savings will cost less.
By Better Rate Mate Editorial Team ยท Last reviewed
General advice only. It doesn't consider your circumstances. Read the PDS and TMD before you decide.
How funeral insurance works
You choose a benefit amount, pay premiums for as long as you live, and the insurer pays the benefit to your family when you die. You are not saving: the premiums buy insurance, not a balance you can draw on.
Cover usually starts straight away, but with a catch. Moneysmart notes that most policies only cover accidental death in the first few years, so if you die from an illness, including a terminal one, during that period the policy may not pay. After that the full benefit applies, subject to the policy's exclusions.
Moneysmart also warns against expenses-only funeral cover, where your family must prove the funeral costs with receipts to claim. It says that type offers less legal protection and has a lot of exclusions.
Why funeral insurance is often poor value
The problem is time. Premiums keep coming for the rest of your life, and Moneysmart says they go up after you turn 50 and every year with inflation. If you live another five to ten years, you may have paid more in premiums than the funeral would have cost. Stop paying, because the premiums have become unaffordable on the Age Pension, and the cover ends with nothing refunded.
Moneysmart's worked example is Mary, who took out funeral insurance at 58 for $20 a fortnight. By 71 her premium had doubled to more than $40 a fortnight, and she had already paid more than $10,000 over 13 years. Those are Moneysmart's illustrative figures, not a current quote, but the pattern they show is the point: a small fortnightly cost becomes a large total.
APRA's industry figures show the same thing. Claims themselves are rarely refused: insurers admitted 99.7% of finalised funeral claims in the 12 months to 31 December 2025. The cost is the problem. Over the same year, claims paid on funeral policies bought direct were worth 37% of the premiums insurers received for them, against 43% to 75% for death cover across the other sales channels.
How to compare funeral insurance policies
There's no single best funeral insurance. The policy that suits you pays a benefit that matches a real funeral quote, has the shortest accidental-only period and charges a premium you can keep paying for life, so compare those features before the price.
Ask each insurer the same questions and get the answers in writing from the PDS and the key facts sheet.
| Feature | What to check | Why it matters |
|---|---|---|
| Benefit amount | Whether it would cover a written quote from a local funeral director | Moneysmart says the usual choice is $5,000 to $15,000, and puts funerals at $8,000 to around $20,000 |
| Accidental-death-only period | How long the policy pays only if you die in an accident | Moneysmart says most policies only cover accidental death in the first few years, so death from illness in that time may not be paid |
| Pre-existing conditions | Any exclusion and how it applies to you | Insurers that follow the Life Code commit to explaining these before you buy |
| Premium type | Stepped or level, and an illustration of how a stepped premium rises | Moneysmart says premiums go up after you turn 50 and every year with inflation |
| Whether premiums ever stop | Whether you pay until you die or premiums end at a set age, and what happens to the cover then | Moneysmart says you keep paying until you die, so you could pay more than your family gets back |
| Benefit increases | Whether the benefit is fixed or increases each year, and how increases change the premium | A fixed benefit buys less as funeral prices rise |
| Cancelling or stopping payments | What you get back if you cancel after the cooling-off period or can't keep paying | Moneysmart says you'll probably lose the money you've paid |
| Cooling-off period | At least 30 days under the Life Code; from your first full premium if the policy starts with little or no premium | Your window to change your mind for a refund |
| Fixed benefit or expenses-only | Whether your family gets a fixed sum or must prove costs with receipts | Moneysmart says expenses-only cover offers less legal protection and has a lot of exclusions |
| Claim payment | How the claim is lodged, how quickly it's paid and who receives the money | Moneysmart warns the payout can take a while to reach your family |
Funeral insurance policies compared (PDS facts as at 10 October 2026)
The table sets out what three direct funeral policies say about the features that matter most, read from each current PDS. It is not the whole market and it isn't a ranking: the order is alphabetical, and premiums aren't shown because they depend on your age and the benefit you choose. Judge any policy you're offered on the same columns.
Two things stand out. All three pay only for accidental death in the first 12 months, and their extras, such as bonus cover or a cash-out, come only after years of cover or from age 85. Australian Seniors and Real Insurance policies are issued by the same insurer, Hannover Life Re of Australasia, on the same terms.
We also checked five other direct brands on 11 October 2026: ahm, Budget Direct, Medibank, nib and NobleOak. None of them sells funeral insurance to new customers (Medibank's funeral policies are for existing customers only). Three build a funeral payment into their life cover instead: on a death claim, NobleOak's Premium Life Direct and Budget Direct advance $25,000 of the death benefit, and nib $30,000, as soon as the insurer has the death certificate and proof of age. That's an advance on life cover you already hold, not a separate funeral policy.
| Policy (issuer) | Benefit amount | Ages you can apply | Accidental death only | Do premiums stop? | Bonus or benefit increases | Cash out or refund | PDS |
|---|---|---|---|---|---|---|---|
| Australian Seniors Funeral Insurance (Hannover Life Re of Australasia) | $3,000 to $15,000 | 40 to 79 | First 12 months (accidental death and accidental serious injury are covered from acceptance) | Yes: no premiums after your 85th birthday, and cover continues | 25% bonus cover added from 85, paid on death, terminal illness or your 100th birthday | Early cash out option from 85: 75% of the benefit amount, and the policy ends | Issued 20 July 2026 |
| Insuranceline Funeral Insurance (TAL Life Limited) | $3,000 to $15,000; can be increased to $25,000 once in place | 40 to 80 | First 12 months, and for 12 months after any increase | No: you keep paying unless you take the early payout from 85 | 10% bonus cover after 5 years; 5% premium discount after 10 years, or from the anniversary after your 84th birthday if sooner | Early payout from the anniversary after 85: 120% of your average cover amount, no more premiums. Value Promise: a claim pays at least 100% of premiums paid (or a 70% option for lower premiums) | Issued 31 March 2025 |
| Real Funeral Insurance (Hannover Life Re of Australasia) | $3,000 to $15,000 | 40 to 79 | First 12 months (accidental death and accidental serious injury are covered from acceptance) | Yes: no premiums after your 85th birthday, and cover continues | 25% bonus cover added from 85, paid on death, terminal illness or your 100th birthday | Early cash out option from 85: 75% of the benefit amount, and the policy ends | Dated 20 July 2026 |
What insurers must tell you before you buy
Insurers that subscribe to the Life Insurance Code of Practice (current version in effect from 1 March 2025) have made specific promises about funeral insurance. Hold them to these if you are being sold a policy.
- That it is an insurance policy, not a savings plan, and what that means.
- Any pre-existing condition exclusions and how they apply, and any period in which the policy pays only for accidental death.
- That the total premiums you pay could be more than the benefit, where that applies.
- The choice between level and stepped premiums, with an illustration of how stepped premiums may increase and a warning about affordability when you retire or enter aged care.
- That you can cancel at any time, and what happens to your premiums if you cancel after the cooling-off period or stop paying.
- A cooling-off period of at least 30 days. For policies with little or no premium at the start, it runs from the day you pay your first full premium, and you must be told in advance when that is.
Seniors funeral insurance and cover for pensioners
Moneysmart's warnings bite hardest on older buyers. Premiums go up after you turn 50 and every year with inflation, and you could struggle to afford them on the Age Pension. If you stop paying, the cover ends and you'll probably lose what you've paid.
Insurers that follow the Life Insurance Code of Practice commit to warning you about future affordability, such as when you retire or enter aged care, if you choose stepped premiums. They also commit to explaining any period in which the policy pays only for accidental death, and to not selling you a policy if you ask for time to think.
For pensioners, the alternatives have an extra advantage. Moneysmart says funeral bonds and prepaid funeral plans aren't part of the Age Pension assets test, and Services Australia says funeral costs paid in advance normally don't count in the assets test, with some exceptions. A prepaid plan also fixes the price at today's rates. Life insurance for over 60s covers the other cover worth reviewing at this age.
Funeral insurance vs other ways to pay for a funeral
Moneysmart lists several alternatives, and some are cheaper over time. Funeral costs you pay for in advance normally don't count in the assets test for Centrelink payments, with some exceptions set out by Services Australia.
| Option | How it works | Cost over time | If you stop or cancel |
|---|---|---|---|
| Funeral insurance | Fixed benefit for ongoing premiums | Premiums rise with age and inflation and can exceed the benefit | Cover ends; premiums usually not refunded |
| Term life insurance | Lump sum on death or terminal illness for a larger sum insured | Stepped premiums rise with age; can be better value per dollar of cover while younger | Cover ends; nothing refunded |
| Funeral bond | Deposit plus regular payments, invested; only usable for your funeral | Money earns returns; check fees in the PDS | Can't withdraw early |
| Prepaid funeral plan | You choose and pay for the funeral with a funeral director at today's prices | Price doesn't rise over time | Depends on the contract; check if it moves interstate |
| Savings account or term deposit | Money set aside and earmarked | Earns interest; no premiums | Stays yours |
| Super | Family claims a death benefit and can use it for costs | No extra cost | Family may pay upfront and be repaid later |
What a funeral costs
Moneysmart puts funerals at between $8,000 and around $20,000, depending on the type of funeral (as at September 2026). The main costs are the funeral director's fees, transport, a coffin, the death certificate and permits, burial or cremation, a cemetery plot, and extras such as a celebrant, flowers, notices and the wake. Getting a written quote from a local funeral director gives you a real target to save or insure against, rather than a guess.
If you already have funeral insurance
Don't cancel in a hurry. Premiums you have already paid are generally gone either way, so the question is whether the premiums still to come are worth the benefit. Ask the insurer for the current premium, how it is expected to change, and whether the policy has any value or paid-up option if you stop.
If you can afford to keep paying and your family would struggle without the payout, keeping it can be reasonable. If the premiums are becoming hard to meet, compare the likely total cost against saving the same amount in an account or buying a funeral bond, and get help from the National Debt Helpline or a financial counsellor if the payments are causing hardship.
General advice only. This information doesn't take into account your objectives, financial situation or needs. Consider whether the product is right for you and read the Product Disclosure Statement (PDS) and Target Market Determination (TMD) before you decide. We don't compare every product in the market, and we may earn a commission if you take up a product through our links.
What to watch for
- Check how long the accidental-death-only period lasts before illness is covered.
- Ask whether premiums are stepped or level, and ask for an illustration of stepped premiums to age 85 or 90.
- Avoid expenses-only cover that needs receipts to claim.
- Don't buy funeral cover over the phone on the spot. The Life Code says insurers must not sell to you if you ask for time to think.
- If you have life insurance already, check whether its sum insured would cover a funeral before paying for a second policy.
Common questions
Is it worth getting funeral insurance?
For many people it isn't. Moneysmart warns funeral insurance can cost a lot more than the benefit, premiums rise after 50 and with inflation, and you lose everything paid if you stop. It can suit someone who is unable to save and wants certainty, but compare it against a funeral bond, a prepaid funeral or savings first.
What are the downsides of funeral insurance?
Premiums can rise sharply over time, total premiums can exceed the benefit, there is no refund if you cancel or can't afford the premiums, illness is often not covered in the first few years, and the payout can take time to reach your family.
Which insurance is best for funeral cover?
There isn't a single best policy, so judge each one on the same columns: the benefit amount against a real funeral quote, the ages you can apply, how long it pays only for accidental death, whether premiums ever stop, any bonus cover, and what you get if you cash out or cancel. The policies compared on this page differ most on the last three. Then check whether a funeral bond, a prepaid funeral or savings would cost less.
How much is funeral insurance per week?
There's no standard price: the premium depends on your age when you start and the benefit you choose, and Moneysmart says premiums go up after you turn 50 and every year with inflation. Moneysmart's own example is a 58-year-old paying $20 a fortnight whose premium had doubled by 71. Add up what you'd pay over 10 or 20 years and compare it with the benefit before you buy.
What is typically the most expensive part of a funeral?
It depends on the funeral you choose. Moneysmart puts funerals at $8,000 to around $20,000 and lists the most common costs as funeral director fees, transport, a coffin, a death certificate, permits, burial or cremation, a cemetery plot, and extras such as a celebrant, flowers, notices and the wake. A written quote from a local funeral director shows where the money goes.
What is the best way to raise money for a funeral?
Moneysmart lists several ways to set money aside in advance: a bank account or term deposit, a funeral bond, a prepaid funeral plan, or your super, which your family can claim as a death benefit (they may pay upfront and be repaid later). Services Australia also offers payments and support when someone close to you dies. Moneysmart warns funeral insurance can cost a lot more than it pays.
Is funeral insurance a good idea for pensioners?
Usually it is the hardest time to start. Premiums are highest in later life and keep rising while income on the Age Pension stays fixed. A prepaid funeral or funeral bond fixes the cost, and money paid in advance for a funeral normally isn't counted in the Centrelink assets test.
Is funeral insurance the same as life insurance?
No. Funeral insurance is a type of life insurance with a small fixed benefit, often little or no health underwriting, and premiums for life. Term life cover usually offers a much larger sum insured, needs more health questions and has an expiry age.
Need help with bills?
If premiums on an existing policy are causing hardship, the National Debt Helpline (1800 007 007) offers free, confidential financial counselling. You can also ask your insurer about its financial hardship options.
Protecting your income as well
Life, TPD and trauma cover pay lump sums. Income protection is the cover that pays a monthly income while you recover.