Death should not be a taboo discussion

Funeral cover is a necessary – if uncomfortable – conversation for every family and staff member

The global outbreak of Covid-19 forced people to confront the reality of ever-increasing funeral costs and changed the conversation around the value of life and funeral cover. However, it did not remove those ingrained taboos perpetuated from generation to generation that still exist around confronting our mortality and that of the people around us. Discussion of death still involves cultural taboo, superstition, emotional discomfort and not knowing what to do when it happens, whether one is mentally prepared because of illness or as a result of a tragic turn of events.

Regardless of the circumstances, death is a subject that must be addressed openly and honestly, both to protect the wishes in the most appropriate way of the person who has passed and to mitigate financial distress for those left behind who have to pick up the pieces of their lives, both emotionally and financially. Lack of preparation can change the legacy a person leaves behind and push the limits of those without the benefit of life or funeral cover, who may have to scramble for funds to bury a loved one — risking prolonged poverty through incurring huge debts to cover the cost.

“Death is not a nice subject to discuss, but as wills are only read some days after someone has passed, without having the conversations, families will not otherwise know the wishes of a person in order to be able to make the arrangements they want,” says Executrust fiduciary specialist and certified financial planner, Marietha Roos.

“Every person has a different opinion on how to plan for the inevitable — or even if to plan. Every individual’s circumstances differ and regardless of income bracket, place different levels of importance on whether to have cover or not. There are people on a minimum wage who pay expensive premiums to cover their families. Then there are people who feel they have enough savings to cover their death costs, and then some who don’t think about cover because they have a son or daughter who they believe will take care of things. The latter makes their children the most vulnerable and open to carrying large expenses.”

Underlining the importance of the family discussion around what policy to go for is the value in getting trustworthy input on such factors as the manner of burial, the number of people to cover on a policy, and whether or not to use an independent financial advisor.

Repatriation of diaspora

No family wants to be left with no other choice than to opt for a pauper or destitute burial. Add to this that South Africa has large communities of diaspora from all over the world, particularly from Africa, and repatriation to a country of origin is often a dying wish — one that will not be paid for at public expense.

South Africa being as culturally diverse as it is means funeral planning must factor in the preferred manner of burial. Cultural and religious beliefs underline the need for both discussion and education around burial options. Aquamation (an accelerated process of returning a body to nature, only available in South Africa through AVBOB) or cremation versus burial, donation of body parts or of the body for medical research, coffin versus shroud, church service versus celebration of life, should be some aspects the family and policyholder should collaborate on before deciding on which policy is the most appropriate.

This substantiates the need for education, and while potential policyholders can research these if they have the available tools, insurers and financial advisors have a role to play in educating people — especially in communities in the lower LSM levels.

Constructive discussion

Regardless of demographic, funeral cover is an essential financial planning tool. There are products catering to both affluent individuals and the upwardly mobile middle income demographic, and policies that can help individuals in the lowest LSMs, but the crucial funeral cover conversation has to take place, no matter how uncomfortable — starting with the family. 

Discussion needs to be constructive and the value of life cover communicated along the lines of it being a commitment to loved ones; a proactive approach to managing life’s uncertainties and potential tragedies; a step towards leaving a sound financial legacy and the importance of not leaving the family destitute through complying with funeral expectations. For families, discussing and integrating funeral cover into a financial strategy demonstrates foresight and concern for wellbeing after the policyholder has passed on.

The funeral cover discussion holds as much importance within the employer-employee space as within individual families, and it is worth keeping in mind how the culture of a company may have led to its choice of funeral policy provider. Funeral and life cover providers usually have group scheme policies requiring a minimum number of members. Premiums are paid for by the employer and such policies cover employees, from large corporations to small and medium enterprises. Some employers may deduct these premiums from employees, depending on their specific employee benefit structures.

There are also voluntary group scheme options — which require a minimum number of members, and which provides cover to such entities as burial societies, church groups and stokvels.

The message to the individual and the employee is to choose a funeral cover that offers as many options as possible to meet specific individual wishes, and is progressive and versatile enough to meet the needs of the majority of cultural and religious beliefs.

Death doesn’t discriminate

According to Kobus Wentzel, Head of Distribution at 1Life, one taboo that needs dismissing is the misconception that funeral cover is for the less wealthy, saying this couldn’t be further from the truth.

“Death does not choose a social class, gender, race or religion,” says Wentzel. “Insurers offering funeral cover have a responsibility to instil a culture of correctly preparing for funeral costs, regardless of what level of the market they are targeting. They are an important part of the support system at the time a death occurs and beyond just considering wealth preservation, should guide families on what is expected of them, such as legal requirements.

“Choosing funeral cover should consider the speed and efficiency at which cover is paid out and whether or not it provides a financial buffer for the policyholder. The cost of a funeral starts at around R15 000 and can go to over R100 000.”

While R100 000 may generally be the upper end of what a funeral typically costs, funerals can be elaborate affairs costing far in excess of this. Wentzel says beneficiaries — regardless of whether they are affluent or not — should not be left carrying debt, on top of dealing with emotional stress.

High net-worth individuals understand the value of comprehensive planning, including how funeral cover fits into a broader estate strategy to protect the legacy they wish to leave behind. Funeral cover is also not the domain of the middle-aged or senior citizen. It’s equally vital for younger South Africans who are building their futures. Death, regardless of age, can be unexpected and even if the younger demographic is juggling student loans, early career expenses, and family responsibilities, there is significant value in securing affordable funeral cover as a part of their financial planning, fitting it in around cultural priorities and family preference.

The mix of traditional and cultural expectation, information limited to those with access to what is available on the market, lower barriers to entry by some insurers, and perceived reasonable costs have provided a good platform for the South African funeral cover and life insurance industry to flourish.

Life and funeral cover has become a very competitive market, with many traditional financial companies such as banks offering insurance cover and services like drafting and storing of wills. There has also been a notable growth in companies — whose core business can be anything from coffee to furniture — diversifying into providing financial services offerings such as funeral and life cover products.

“The problem that comes up is that those companies that have diversified into offering funeral cover products usually do not have the depth and experience in funeral cover and undertaker services. They are not expert advisors, but rather pushers of product,” continues Roos. “Consumers will not be properly advised of the fine print of contracts and there is the risk that instead of an outstanding debt or contract being properly managed by an executor, some of the funeral cover funds may be used by the untraditional insurer to settle what has been purchased on credit or agreed to on a lease.

Appropriate advice

“An executor is absolutely vital, as is the importance of speaking to a financial advisor or fiduciary specialist. All financial advisors should be registered with the Financial Sector Conduct Authority (FSCA) and belong to the professional body, the Financial Planning Institute (FPI). Fiduciary practitioners or specialists should be Fiduciary Practitioner of South Africa (FPSA) registered, which also requires them to be a Fiduciary Institute of South Africa (FISA) member. These registrations should top the list when looking for a financial planner or fiduciary practitioner. Their role is not to push products, but to give tailored advice for each individual and suggest the most appropriate solution. Theirs is the correct approach when assisting anyone with their financial planning and wealth creation.

“A policyholder must appoint someone they trust as executor of their estate in order to protect the interests of their beneficiaries. In the event of their death, the reaction of families can be motivated by emotion, panic and fear, and mistakes [are] made. For example, notifying a bank of a death when a spouse is married in community of property before a will has been read can mean frozen accounts and a family left high and dry. When the executor has been appointed, that person takes over the role of the policyholder and has the permission and mandate to keep bank accounts open, rearrange debit orders and keep an audit trail of transactions and relevant sundry policyholder information.”

Roos stresses the importance of every individual having a “death file” that contains copies of the will, policy documents, marriage certificates and other important documents that are available as soon as possible to the primary beneficiary and executor responsible for finalising things. The file’s whereabouts and contents should be made known and discussed beforehand with the executor and responsible beneficiary, and be available to the financial advisor, who, she says, is usually the first port of call for the bereaved to source information.

Both the executor and the primary beneficiary need to be aware of and understand the fine print, and the policyholder needs to be willing to be transparent about sharing financial information and what their wishes are. Without all the right documents being available — including the death certificate, which must be obtained within 14 days of a death — insurers will be unable to pay out within their policy terms and conditions.

Making business easier

Technology has become the essential core for competitive advantage when offering financial products and services, with agility, scalability and the use of the latest technologies such as artificial intelligence part of any financial institution or enterprise — with data, privacy, safety and cybersecurity being top concerns.

There are some financial service providers who have built their business offering around the use of technology from their inception. Others, with decades-long histories grounded in providing funeral cover and undertaker services, such as Assupol, AVBOB and Doves Group, have steadily adjusted their technology strategies to modernise and optimise how to use it to grow the business and revenues, enhance customer experience and make greater organisational collaboration possible.

“Technology is being applied to make doing business easier,” says Roos. “However, it won’t remove the importance of having a face-to-face interaction, especially with a financial advisor. Both technology and a registered expert advisor add to the spread of education to the client and potential client base, but face-to-face is important as it helps aid in explaining the advice and enables the client to understand the reasoning behind it. Technology will not replace the value of the personal touch.”

Open communication

With South Africa facing multiple economic headwinds, consumers are being adversely affected by rising prices and shrinking budgets. It is important to remember that a funeral cover policy requires a monthly premium, which can be structured according to available disposable income. 

A policy should be taken with a company that proactively helps prevent policyholders being over-insured, assists in making sure the cover is adequate, regularly evaluates cover appropriateness and helps when financial difficulty affects payment of premiums. The importance of maintaining open communication and a transparent relationship with the insurer cannot be stressed enough. There are always options to ensure funeral cover is maintained in the event of an income change such as a retrenchment, unexpected financial costs, becoming ill or disabled, or going on pension.

Only by breaking the taboos around discussing death can policyholders — regardless of their financial standing — take charge of their family’s financial future, ensure their legacy is handled responsibly and gracefully, that their wishes are respected and through funeral cover ensure their families are not financially burdened with unforeseen costs, allowing them to grieve with dignity.

Funeral insurance – A product for the less wealthy, or is it?

By Kobus Wentzel

There is a common misconception that funeral insurance is a product for the less wealthy however, death and taxes are two of life’s certainties and so this couldn’t be further from the truth. The cost of a funeral starts at around R15 000 and can go over R100 000 – something that can set, even the upper end of the earning spectrum, back.

The reality is changes in local legislation has opened up a new category of funeral policies that cater specifically to the more affluent – offering cover of up to R100 000 and providing the consumer or their Financial Adviser a critical opportunity to tap into this market with various, flexible funeral plans/cover amounts that aligns to their larger financial portfolio.

But funeral cover is not just about cost of premium or of the funeral for that matter, speed and efficiency is key and therefore choosing a cover that pays out quickly as well as looking for one that has added value ensures a financial buffer for the policy holder. It is within our power to guide our clients and ensure that their beneficiaries are not left carrying the financial burden – whether affluent or mass market clientele. 

Since 2021, we have seen a significant increase in the life and funeral insurance space. In fact, today we are still seeing higher claims figures than pre-Covid-19 levels. Similarly, the combination of life and funeral product sales in the more affluent market is seeing a higher sum assured indicating that funeral is NOT only for the mass market but certainly, the affluent market is showing promise in this space. 

Death does not choose a social class, gender, race, or religion and therefore, it is our responsibility to instil a culture of correctly preparing for funeral costs – costs that clients can mitigate eating into their family’s future wealth by simply considering funeral insurance. 

1Life Insurance Ltd (Reg No. 2005/027193/06) is a licensed Life Insurer and Financial Services Provider (FSP No. 24769)

• Kobus Wentzel, Head of Distribution at 1Life