Planning Ahead:
Insurance or Pre-paid?
One of the most common questions for New Zealanders planning their farewell is whether to pay now or insure later. We break down the math and the fine print.
Funeral Insurance
You pay a monthly premium to guarantee a fixed payout (usually $5k to $20k) when you pass away.
Pros
- Immediate cover (usually after 12-24 months).
- Low monthly cost if started young.
- Simple to set up with no medical exams.
Cons
- Premiums often increase with age.
- You may pay in more than the eventual payout.
- If you stop paying, you lose all cover.
Pre-paid Plans
You pay a lump sum or installments today to 'lock in' the cost of a funeral at today's prices.
Pros
- Locks in today's prices (inflation-proof).
- Relieves your family of the entire bill.
- Funds are held in an independent trust (safe).
Cons
- Requires upfront capital or commitment.
- May be tied to a specific funeral director.
- Can be complex if you move cities.
Our Verdict?
In New Zealand, **Pre-paid Funeral Trusts** are often the better long-term financial move as they protect against the rising cost of funerals. However, **Insurance** is a vital safety net for those who haven't yet reached their savings goals.
Did you know?
Up to **$10,000** in a pre-paid funeral plan is usually excluded from asset testing for the Residential Care Subsidy in NZ.
Common Questions
Is funeral insurance worth it?
Only if you cannot afford to self-insure or set up a pre-paid plan. It's best used as a temporary bridge while you save for a permanent solution.
Who holds the money in a pre-paid plan?
Under NZ law, funds must be held by an independent trustee (like Public Trust or FDANZ Funeral Trust) to ensure they are safe even if the funeral home closes.
Can I get a refund on a pre-paid plan?
Most trusts allow for a partial refund (minus admin fees), or for the funds to be transferred to a different director if you move.