Marcus Aurelius, perhaps the greatest Roman Emperor of all time, once said “Death smiles at us all. All we can do is smile back!” For many people this thought fills us with dread and uncertainty. The prospect of what will happen to your family and loved ones after you’re gone is also uncertain.

It’s a sad reality that 85% of South Africans die without a will in place and only 49% (19 million) have a funeral plan or life policy in place, which often means loved ones end up spending additional time, money, and emotional energy to settle your affairs after you're gone.

That is hardly the legacy anyone wishes to leave behind. The best way to protect your legacy is to put in place a will and protect your family from any liabilities after you’ve gone. This article is going to unpack funeral plans and life policies and help you create your last will.

What is funeral cover? 🪦

The costs of funerals are often the responsibility of the family of the deceased. A funeral can cost anywhere from R 15,000 to R150,000, yet the maximum cover for a funeral policy is R100,000, which is why almost 8 million people have two or more policies to increase their cover. 

A funeral plan is a life insurance policy that pays out the policy benefit after the death of the insured person (typically within 24 to 48 hours) to the policy beneficiaries, in return for a monthly or annual premium. You can also insure a number of extended family members on a single policy.

The policy benefit – typically a sum of money – may differ depending on the type of funeral plan you take out. It could include:

  • The burial and funeral services costs;
  • The tombstone and coffin, or urn and cost of cremation;
  • Transport to a funeral home; and
  • Additional cover for dependents.

Funeral plans are not underwritten, meaning that you do not need to undergo a medical exam before taking out a policy. Most funeral policies are sold on the basis of just a few questions. 

However, insurers impose strict exclusion criteria and waiting periods before a policy benefit is paid out. A waiting period is the period during which you cannot claim on your policy despite the policy being active and your premiums paid.

Waiting periods prevent people from taking out cover when they know someone insured on the policy could die soon and therefore keeps the costs of the cover down. The typical waiting periods imposed in funeral policies are:

  • Natural causes: deaths from age or illness, which can be anything from 6 to 12 months from the time the policy is active. 
  • Suicide: anything up to 24 months.

How is life insurance different? ☂️

Life cover is a long-term insurance policy that pays out when the policy holder dies. It can also insure against disability and severe illness.  

If you take out life cover on your own life, the benefit will be paid to anyone you name in the policy, such as your spouse, children or other family members. If you don’t name beneficiaries it will be paid to your estate.

If the benefit is paid into your estate, it can, after the estate’s debts are paid, be paid to your heirs in line with your will, if you have one, or divided amongst your surviving spouse, children, parents or siblings as per the Intestate Succession Act 1987. 

The benefit a life policy pays out depends on how much cover you take out, which in turn determines the premium you have to pay on a monthly basis. The affordability of life cover is important, because if you default on your payments you risk the policy benefit not being paid, so only take as much cover as you can afford.

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Funeral policies are more lenient. The insurer must give you 15 days to pay outstanding premiums on your funeral plan before the policy lapses or is terminated. 

Life cover can either be underwritten by a medical exam or not, which often impacts on the quoted premium (underwritten policies are typically cheaper).

Key difference between funeral cover and a life policy:

  • Underwriting: Most life policies require a medical exam prior to quoting.
  • Sum assured: Funeral plans are limited to R100,000 per policy, whereas life cover is limited only by your affordability.
  • Processing time: Funeral policies typically pay out claims within 24 to 48 hours, whereas life policies typically take longer given that there are larger sums of money involved.

Key concepts of life cover ✅

It’s important to understand the following key components of both funeral plans and life insurance when assessing policies:

  • The policyholder is the person who purchases and owns the life insurance policy.
  • The premium refers to the regular payments (either monthly, quarterly, or annually) made by the policy holder to the insurance company.
  • The beneficiary is the person or entity (such as a family member or a trust) designated by the policyholder to receive the policy benefit when the insured person dies or becomes disabled.
  • Policy Benefit is the amount of money that the insurance company pays out to the beneficiary upon the death or disability of the insured person.
  • Exclusions are policy limitations and instances in which a claim will not be paid.
  • A quote is an indicative premium quoted by the insurer based on a basic health questionnaire and may change after the medical exam.
  • Underwriting is a medical exam or questionnaire that is required by some life policies prior to quoting.

How to draft a will 📃

A last will and testament is a legal document that lets you decide what happens with your estate and the care of your dependents after your death. If you die without a will, your wishes may not be carried out.

If a deceased estate in South Africa is worth less than R250,000, it is considered a small estate. 

The distribution of assets in a small estate follows the Intestate Succession Act and is typically managed by the Master of the High Court. If there is no will, beneficiaries are typically the spouse, descendants, parents, and siblings, in that order.

However, if the value of the estate exceeds R250,000, letters of executorship must be issued and the full process prescribed by the Administration of Estates Act must be followed. And this can be time-consuming, expensive, and even contentious for your loved ones.

One of the top reasons to have a will is to streamline this court process. When you have a will, you can choose the person you want to handle your estate (your executor), making it easier and often more affordable for your loved ones.

Apart from the appointment of your executor, the most important element of your will is outlining how you wish to distribute your estate. You can specify who gets what, or how to divide your estate between your heirs, or a combination of the two. You can also name beneficiaries for any property that you don’t list — the “residuary” of your estate. 

You can also leave instructions about how you would like to be buried in your will. While these instructions aren’t legally binding, they can give your executors and loved ones some guidance on your wishes. 

It’s important to remember that a will is not a static document. As your estate grows or your personal circumstances change, (e.g. new spouse, new child) it’s best to review and update your will annually if needs be.

Protect your legacy 

Most people put off sorting out life cover because the process is often time consuming, confusing and painful to think about, or put off creating their will because they assume their loved ones will automatically get an inheritance. 

But it’s important to protect your legacy and put in place a will and some form of life cover if you wish to protect your family from the costs of your funeral or any outstanding debt or liabilities in your name.