There’s no escaping death and taxes – be prepared

Benjamin Franklin couldn’t have been more accurate when he said, “In this world nothing can be said to be certain, except death and taxes.” So why do we find it so difficult to plan properly for something that is inevitable? We are all going to die, so why not be prepared?

“It’s one of those situations where people feel it is more important to cater for their everyday wants than plan for the future,” says Mellony Ramalho, African Bank Executive. “Sadly, when there is a death many families are left with huge bills and uncertainty on how they will pay them. That’s why it is so important to put even just a little into a policy every month.”

South Africa has a unique community culture, where families often end up looking after each other. “The reality is that many people are expected to help financially when not only a family member but an extended family member or friend passes away. Taking out a funeral policy that covers only direct family members does not meet the demand in our funeral culture,” adds Ramalho.

Taking out multiple policies to cover these expenses or even a loan is also not ideal and is costly as interest is charged on the loan amount. “At African Bank, we receive between 500 to 800 Personal Loan applications per month, specifically to cover funerals.”

Ramalho says funerals, and all that goes with them, can cost anything between R25 000 and R50 000. “This is a big amount of money that you need almost instantly. Scary right? If you are feeling convinced that now is a good time to look into a funeral policy there are three questions you need to ask – who does it cover; how quickly can you get your money out; and how much will be paid out?”

She believes that a funeral plan that allows for flexibility in terms of the beneficiaries is best. One that includes cover for extended family and possibly non-family members too. “African Bank’s funeral insurance, for example, allows you to extend the cover for up to 8 additional people on the policy – people who are important to you. In total you can cover 18 people on the policy, including yourself,” she explains.

Ideally the plan should also do quick payouts. “Ask what documents are needed upon death before a payout is made. Our payout policy is a 24-hour turnaround time from the time that we approve the claim or we commit to pay double the payout amount. Insurance companies also have different waiting periods before you can claim. Some insurance companies require a compulsory 6 or 12 month waiting period before any claims can be made and others require a 24 month waiting period. Especially since there are no examinations involved, they need to be certain you do not have an illness of which you haven’t informed them.”

Once you’ve signed up for the funeral insurance, don’t stop paying your monthly premiums, says Ramalho. “It sounds obvious but very often people take out cover and then stop paying their monthly premiums for various reasons. If you aren’t paying, then you won’t be able to use the policy if someone dies. It doesn’t matter if you have been paying for 10 or 20 years. The month that you stop paying, you lose all benefits.”

To encourage customers to continue with their payments, she says African Bank came up with a key incentive. “We will increase the insured sum every six months by 5% on the accumulated insured sum with no increase in the monthly premium until the insured sum has doubled.”

But what happens if you lose your job and can’t afford the monthly payment? She says most insurance companies allow downgrading your premium. If the company doesn’t allow this, they may suggest you cancel the policy and opt for cheaper funeral cover to suit your budget. It would be best to ask about this before applying for a particular funeral cover plan especially when you’re having doubts about whether you’ll still be able to afford this payment a year after applying.”

“But remember paying a small fee on funeral cover every month is much more convenient and affordable than paying a large amount of money to cover funeral costs, and struggling to make ends meet if the breadwinner has passed on,” says Ramalho.

“The key is to plan ahead so you don’t leave your family burdened upon your death or find yourself out of pocket should a dependent or non-family member pass away. The last thing you want during a time of mourning is financial stress, so plan ahead,” concludes Ramalho.


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