ASIC has released research showing some consumers do not have a good understanding of the products they are buying to help pay for their funeral.
The research found that consumers will settle with the first product they find in trying to avoid being a burden on others. They are less likely to pick the best product for their circumstances or take value for money and long term costs into account.
ASIC’s Consumer Advisory Panel (CAP) commissioned research to explore consumer awareness and understanding of three common products that consumers use to meet future funeral costs:
prepaid funeral plans – where consumers choose and pay in advance for their funeral
funeral bonds – investment products that help consumers save for funeral expenses, with the funds withdrawn after death to pay for the funeral
funeral insurance – where consumers pay monthly or fortnightly premiums for a fixed amount of cover to be paid out after death.
Key findings of the research, published in the report Paying for funerals: how consumers decide to meet the costs include:
Many people did not understand the overall cost of funerals.
People were not aware of the alternative ways to meet funeral costs, such as prepaying by instalments or buying funeral bonds.
The term ‘funeral plan’ was used to describe the three different funeral products in advertising material, making it difficult for consumers to differentiate between them.
Many people did not understand some of the key features of funeral insurance: increasing premiums, total cost when compared to the real cost of a funeral, and what will happen if they miss payments.
People struggled to find clear information about the different types of funeral products and the features of each type.
“We recognise that planning for a funeral can be a difficult process. It is important for people and families to understand what they are buying and the difference between each product, so they have peace of mind and pick the best product for their financial circumstances,” said ASIC Commissioner Peter Kell.
“Premiums for funeral insurance usually increase with age. If you can't keep up the payments you are likely to lose all the money you have paid towards the insurance,” he added.
ASIC is asking people who want to plan their funeral to look at the real cost before they put their money on the line.
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