The Difference between Funeral Cover and Life Cover

Making the right financial decision when choosing insurance can be complicated and overwhelming. With so many options to choose from, how do you know if you have the right cover?

From a financial planning perspective, it is important to prepare and minimise the financial blow should a loved one or breadwinner pass away. You can consider a funeral policy such as the ones offered by Alliance Insurance Company, or life cover policy as part of your risk management strategy. You may ask;  what is the difference between the two?

What is the difference between a funeral and life cover?

	Funeral cover	Life cover
What does the policy cover?	Covers expenses such as burial, groceries, tombstones and funeral services.	Covers against loss of life or  life changing conditions such disability, chronic illness etc.
Timeline or period	It takes care of the immediate costs or short-term financial needs such as burial expenses.	It takes care of the immediate  and longer-term financial needs by providing income to take care of expenses such as rent, groceries, school fees etc.
Lump sum pay-out	Pays out a lump sum up to a maximum of LSL250 000.00 per life insured.	Pays out a lump sum and provides income after the passing of the breadwinner.

Which policy should you consider?

It depends on your individual and family needs, affordability and pre-determined risks. Compare and consider the following before making the decision:

• How much is the maximum pay-out on the funeral vs life cover?
• How much is the premium payable on the funeral vs life cover?
• Do the benefits offered meet your financial needs?
• What is the total spend on multiple funeral policies vs on the premium?
• Is funeral cover embedded in the life cover policy?

Conclusion

While funeral polices remain popular in Lesotho than life covers, it is important to get comprehensive financial advice because many people spend up to LSL1000 on premiums per month on multiple funeral policies including those for whom they do not necessarily have direct insurable interest. This puts a strain on their pockets, and thus they may not have disposable income for savings and/or investments. For people with a few dependents, the advice would be to consider paying a premium of say, LSL600 for a life cover policy that can extend the financial benefits up to LSL500 000 or more, providing income that will help the dependents take care of living expenses when the breadwinner is gone. Remember to always read the terms and conditions before deciding on the cover and consult an advisor to get advice that meets your specific needs. Likhomo!