Funeral assurance as first option

IN our last discussion, we spoke about funeral policy as the ultimate regarding financial planning in the unfortunate but definite situation of death. This week we look at the options available should one decide to go the funeral assurance route.
Life assurance
Universally this is a contract between the policy holder and the insurer whereby the insurer agrees to pay out the amount stated in the policy to the assured or his/her beneficiaries in the unfortunate event of death.
The key word here is financial interest. It is a part of the contract that in return for the benefits, the client must pay a premium to the insurer.
Insurance premiums are due and payable annually, but because most people have periodic income received monthly, insurance contracts now have provision for monthly payments.
In the event of the policy reaching maturity or the insured person dying before then, the life assured or any beneficiary stated in the policy will receive the benefits. The sum assured determines the premium payable.
A life policy and a funeral policy are in the same class of insurance products differing only in the way payouts are made. Otherwise structurally they are both designed to give soft financial landing in times of grief.
Funeral policy: This is a policy whereby the insurer assumes in return for a premium, an obligation to provide on the death of any person covered by the policy, benefits not exceeding the amount assured. In this case the amount assured consists of the provision of the funeral for that person.
The main difference between the two is that whereas in a life policy, there is the payment of cash, in the funeral policy, there can be both the payment of cash as well as the provision of the funeral service. Hence the policyholder will not have to look around for a service provider once the insured risk occurs.
Companies providing life policies and those providing funeral policies both fall under the ambit of the Insurance and Pensions Commission (IPEC).
This is a statutory requirement. With this IPEC, members of the public are protected against unscrupulous operators who could collect premiums from the unsuspecting public and then fail to provide the insured benefits.
Besides Nyaradzo Funeral Assurance Company, there are several other registered and fully integrated service providers as well as numerous often unregistered sole traders.
Funeral assurance policies are generally classified into two groups which are; Individual and Group business.
Individual policies
Traditionally individual policies were meant to provide cover to the breadwinner together with his beneficiaries, mostly members of his/her immediate family. Products recently developed now extend cover to members of the extended family, that is, parents and in-laws.
The policyholder or the proposer should be able to pay the premiums for all his/her chosen beneficiaries. Individual policies are mostly limited term life policies; so named because contributions are made for a limited period while the benefit will be paid out only on death. Premiums can be paid for periods of between five and 25 years.
During this tenure the policyholder and their beneficiary will be covered subject to the payment of the regular premiums.
Should the breadwinner pass on, there is a provision of waiver of premiums under which the beneficiaries will remain covered without having to pay any additional premiums.
The waiver of premium normally starts after premiums have been paid for a certain period of time e.g. two years. Should the bread-winner who in most cases is the proposer on the policy die after the two years, the policy becomes paid up.
A policy can also become paid up after payments have been made for the prescribed period under the policy, which is commonly called ‘the term’.
Paid up policy
A paid up policy is described as one where all the premiums have been received by the insurer or where by way of a policy provision, further premium payments have been waived.
In normal cases, a paid up policy refers to a policy paid to term.
In the special circumstances of the proposer dying before the maturity, the waiver of premiums on the beneficiaries takes effect.
 In this special case, the assurer makes payment from a pool of funds created using contributions from the waiver of premium contributions.
Therefore the onus will be on the company to provide the service to a paid up policyholder without asking for additional funds.
There are various plans within the individual policy range which are meant to cater for all classes of people depending on taste as well as affordability.
Most companies put together a menu of benefit offerings and brand them. For an example Nyaradzo has branded its product offering as follows:
Executive plan
Included under this plan are a number of services offerings:
– An ambulance to transport the de-ceased from local hospital, nursing home or residence to the funeral parlour.
– Bathing and dre-ssing the deceased.
–  A casket.
– All pertinent documentation ie burial order etc.
– A hearse to transport the deceased from parlour or residence to place of burial/cemetery.
– Use of lowering machine and tent
– Video recording of funeral proceedings for posterity and also for the benefit of friends and relatives not at the funeral.
Under this plan some funeral companies have gone as far as providing additional transport for mourners in the form of a bus.
Classic plan
The benefits in this plan are almost similar to the Executive plan with the exclusion of the video recording.
Budget plan
The benefits for the budget plan are as follows:
– An ambulance to transport the de-ceased from local hospital, nursing home or residence to the funeral parlour.
– Bathing and dre-ssing the deceased.
– A coffin/casket.
– All pertinent documentation ie burial order etc.
– A hearse to transport the deceased from parlour or residence to place of burial/cemetery.
lUse of lowering machine and tent
Group policies
Group policies came about after realising that in most instances where an employee or a member of the immediate family dies, the burden will be upon the employer to fund the burial.
In order to alleviate the unbudgeted pay out of large sums of money and the inconvenience of arranging employee funerals, funeral assurers developed this product.
With time the product has now been modified to cater for large families as well as burial societies.
The difference between group and individual policies is in ownership.
The owner of the scheme in the group business is the company while the owner in an individual policy is the individual proposing for the plan.
Group policies are normally term policies renewable annually and can be paid to perpetuity. This is so because companies are unnatural persons with no limit to their existence. Individuals have a limited period of existence; as a result they can only make contributions for a limited number of years. Premiums on group policies work out to be lower due to economies of scale.
Other options
Pre-paid plan
This plan really allows the client to do as they wish with their money and benefits.
The client chooses a plan and pays for it, hence locking value.
The total or part benefits can be used for any other person as chosen by the proposer. The service is guaranteed as long as the total value of the service provision has been paid for.
Flexi-plan
With the flexi-plan, the client will pay as and when they can afford to, thereby contributing to some kind of savings with the Company.
The savings can however, be used only for a bereavement and the services provided will be restricted to the total savings. As the prepaid plan above, the client can transfer all or part of the savings to any beneficiary of their choice.
Why funeral policy
Death is not a total surprise, it is a part of  a “cycle” and it may occur at any time.
The convenience that come with acceptance and planning for it far outweighs the denial and rejection of it. Family savings, chema or funeral assurance are the options that families can fall back on in times of need.
The benefits provided by funeral assurance as mentioned above look to me as the only decent way of planning one’s death. Today more families are planning their funerals in advance courtesy of funeral assurance policies, besides we only live one life in this form.
It makes sense to leave in style, for both ourselves and our loved ones.
With a funeral assurance policy in place death is not a morbid and scary event, it is a part of our daily lives.
Common pitfalls
to avoid
-bRead the small print in the insurance contract and understand the terms and conditions of your policy to avoid disappointment in times of claim.
– Ensure you are dealing with a registered reputable company where you have recourse should there be disputes at the time of claim.
– Deal with only those organisations that can guarantee the provision of the insured service at the time of claim.
– If in doubt check with (IPEC) before you enter into an insurance contract.
Companies that are honourable do abide by the terms of the contract to the convenience, pleasure and comfort of their policyholders. In fact they are a blessing to the field and trade of insurance.
– Philip Mataranyika is the chief executive officer of Nyaradzo Funeral Assurance Company.