Funeral insurance NZ: Benefits and best alternatives

Funeral insurance provides a lump sum payment to your estate or nominated beneficiary upon your death (or to you, if your plan includes an early payout in case of a terminal diagnosis or other covered situations). This fund can help cover funeral expenses and other final costs, lightening the financial load on your family during a stressful time.

Key features:

• Maximum cover amount: You can choose the cover amount, up to a maximum of  $30,000.
• Guaranteed acceptance: New Zealand citizens, residents, and those who meet the residency criteria can obtain cover without medical examinations. Some insurers offer funeral cover only to those aged 50 to 79 or 80, while others make it available to those who are at least 18 years old.
• Quick payout: Claims are typically processed within one to two business days after receiving all necessary documentation, ensuring timely financial support for your family.
• Level premiums: Premiums remain level without annual increases, making it easier to budget over time. Some insurers even offer discounts for joint policies. 
• Accidental death benefit: Insurers typically provide immediate cover for accidental death. Several policies also offer a higher payout for accidental death, such as double or even triple the cover amount.
• Terminal illness cover: After 12-24 months of cover, insurers may provide an early payout of the full benefit, allowing you to manage final arrangements without financial worries. In case of a terminal illness diagnosis within the first 12-24 months of your cover, insurers may refund the premiums you’ve paid. 
• Death due to natural causes: Insurers typically cover this after 24 months, providing your beneficiaries the full benefit amount. If death occurs within the first two years of your cover, insurers will refund the premiums you’ve paid.
• Premium waiver: Depending on your plan, your premiums will be waived when you turn 85 or 90 or go into long-term care, while your cover continues. 
• Other benefits: Some insurers provide other benefits, such as: 
  • Adding 25% to your cover when you reach 85
  • Giving you the option to end your policy and get 75% of your cover amount when you reach 85
  • Paying you 125% of your cover when your policy ends at age 100.

Funeral insurance alternatives

While standalone funeral insurance helps you prepare for end-of-life costs, the premiums you pay may be equal to or even exceed your benefit amount.

However, there are alternatives to explore. These might include prepaid plans, personal savings or estate, KiwiSaver, and grants from the ACC, WINZ, Veterans’ Affairs, or insurance plans with bereavement support benefits or significant lump sum payments.

The plans below give you some idea of what types of insurance can help cover your or your loved one’s final expenses. 

Life insurance

For broader financial protection than standalone funeral insurance, consider a life insurance plan. While funeral insurance covers only end-of-life expenses, the best life insurance plans provide a larger payout if you pass away due to an accident, terminal illness, or other causes covered under your policy. 

Life insurance can provide long-term support to your loved ones and dependants and replace your income after your passing. Your family can use the benefit for funeral costs and ongoing financial needs, such as living expenses, education, mortgages, and debt payments.

• Maximum sum insured: Unlike funeral insurance plans, typically capped at $30,000, life insurance lets you set a much higher amount to ensure your loved ones have sufficient funds to meet their needs after you’re gone.
• Bereavement support benefit: Most life insurance policies already include immediate financial assistance, mostly up to $25,000, to cover funeral costs. This amount will be deducted from your total cover payout.
• Terminal illness benefit: Many life insurance policies offer an early payout if the insured is diagnosed with a terminal illness and has a life expectancy of less than 12 months, allowing funds to be used for medical expenses or to settle affairs in advance. 
  
  Other plans have provisions releasing a portion (typically 30% up to a capped amount) of the life cover amount if the insured is diagnosed with a specified condition, such as motor neurone disease and exocrine pancreatic cancer (stage 3 or 4).

Other types of insurance

While not specifically designed to cover funeral costs, certain insurance policies can ease the financial pressure of funeral expenses for New Zealand families. Here’s how:

• Comprehensive health insurance: While primarily intended to cover expensive private hospital surgical and medical treatments, some policies include a funeral support benefit of up to $10,000. 
• Income protection insurance: Income protection cover provides monthly payments if you're unable to work due to illness or injury. Some policies have either built-in or optional death benefits, which can grant your loved ones up to three times your monthly benefit in case of your death. 
• Mortgage protection insurance: Mortgage protection provides monthly payments if you can’t work due to a medical condition or injury, allowing you to have enough funds for mortgage repayments or rent and other expenses. Some plans have built-in or optional death benefits providing up to three times the monthly benefit if the insured passes away. 
• Trauma (critical illness) insurance: 
  • Standalone trauma cover pays a lump sum (up to $3 million) if you're diagnosed with a serious illness or injury covered in your policy, such as cancer, heart attack, or stroke. While trauma insurance mostly covers expensive and long-term expenses due to critical medical conditions and injuries, you can opt to set aside part of the payout for funeral expenses if the illness progresses.
  • Accelerated trauma cover, which is added to a life insurance policy, pays a lump sum in the event of a covered critical illness or injury, terminal illness, or death. If the insured passes away, a portion (typically up to $25,000) of the lump sum benefit will be paid in advance to cover funeral costs.

RECOMMENDED READINGS

Key differences between life insurance and health insurance

Mortgage protection vs income protection insurance

Trauma insurance vs income protection insurance

Other ways to pay for funeral costs

Pre-paid funeral plans

Funding a funeral in advance will secure current pricing against future increases. Payment may be made as a lump sum or via instalments, and upon the individual’s passing, the designated provider executes the plan as arranged. 

Personal savings

Establishing a personal savings reserve offers an independent way to finance funeral expenses. Funds can be made accessible to families through joint accounts or explicit instructions, ensuring prompt availability. 

Estate of the deceased

Utilising assets from the deceased’s estate - such as bank accounts, investments, or property proceeds - serves as a conventional method to cover funeral costs in New Zealand. However, delays in probate or asset liquidation may mean family members need to make initial payments out-of-pocket, with reimbursement sought later. 

ACC funeral grant

The Accident Compensation Corporation (ACC) provides a funeral grant when death results from situations covered under its scheme, such as a motor vehicle accident. The deceased’s partner, child, or dependant may receive a one-off grant up to $7,793.17 (based on recent figures) to help cover funeral and memorial expenses. 

WINZ funeral grant

Work and Income New Zealand (WINZ) administers a grant to assist low-income individuals unable to meet essential funeral costs. This grant provides up to $2,559.20, contingent upon meeting income and asset thresholds.

Veterans’ Affairs funeral grant

A funeral grant of up to $3,197.64 for eligible veterans’ funeral expenses or related costs can be extended by Veterans’ Affairs New Zealand.

Early KiwiSaver withdrawal

Under exceptional circumstances, KiwiSaver permits early withdrawals to cover funeral costs for a dependant family member - such as a child or spouse - where significant financial hardship is demonstrated. 

How much does a funeral cost in New Zealand?

Funerals in New Zealand can be expensive, with costs depending on personal preferences, cultural or religious traditions, and location. Some families face unexpected financial pressure when considering the funeral service, burial plot, casket, and cremation options.

Funeral price factors

Several factors influence the total cost of a funeral in New Zealand:

• Religious, ceremonial, or family requirements – Some traditions involve additional services, longer ceremonies, or specific rituals that may increase costs.
• Burial or cremation – Burial is generally more expensive than cremation due to the cost of a plot, headstone, and associated fees.
• Burial plot and related costs – If burial is chosen, costs include the purchase of a plot, digging fees, a casket, headstone, and transportation.
• Funeral or memorial service location – Holding a service at a funeral home, church, marae, or private venue may involve venue hire costs.
• Other expenses – Newspaper notices, death certificates, embalming, floral arrangements, funeral director fees, and catering also contribute to the overall cost.

Funeral costs breakdown

The table below provides an estimated breakdown of funeral expenses in New Zealand. These costs vary depending on location, service providers, and personal preferences.