Commissioner's Blog: Avoid a funeral RIP-off
With Acting Consumer Protection Commissioner Gary Newcombe...
You may have seen or heard adverts about ways to pay for your funeral in advance to take the pressure off your family when the time comes. A funeral could cost thousands of dollars depending on the kind of service you want, which means planning ahead is a good idea. However, paying for funeral cover can be expensive and complex. One of the easiest ways is simply to save.
If you set up a savings account, separate to your everyday account, you can pay into it how much you want and as often as you want. If you put away $20 each fortnight you would have more than $1,000 after two years. With a savings account you don’t lose money if you miss payments due to unexpected expenses. Instead your money stays there until you can save more and it just takes a bit longer to reach your goal.
When planning your funeral finances, first check whether you already have some kind of cover through superannuation, health insurance or the Centrelink bereavement payment scheme (see: www.humanservices.gov.au).
If you decide to buy a funeral product, make sure you understand the different types available to work out which is best for you.
Funeral insurance is not savings. If you stop making payments you lose your cover and won’t get a refund on what you have paid. Also be aware that payments may increase, and over time you might end up paying a lot more than the amount that is due to be paid out for your funeral.
Pre-paid funerals let you pay in advance through a funeral director. You can choose the type of funeral you want and pay today’s prices even if the service takes place 50 years from now. There must be a written contract and you get a signed copy. Cancellation may mean you lose your money and the agreement may not be able to be transferred if you move interstate and almost certainly won’t be transferred overseas if you move. If the funeral director is a member of the Australian Funeral Directors Association (www.afda.org.au) your money will likely be held by a third party, meaning it is safe even if the company goes out of business. If the funeral director is not a member of AFDA check that your money will be held by a third party such as a financial institution. You should also receive a certificate from the institution confirming investment of your funeral funds, and that the funds are released only to a funeral director on their proof of delivery of a funeral service. Make sure you tell your next of kin that you have pre-paid for your funeral and give them the details on how to make a claim.
Funeral bonds are investments, which should grow in value. It is like putting money in the bank except it usually can only be used for your funeral and normally can't be accessed earlier. There can be up-front payments and/or fees and charges.
Some tips to help you avoid a funeral rip-off:
- Ask the amount you need to pay and when, and how much it will cost you over the long term e.g. total if you pay $xx a week/fortnight/month for x years?
- Find out what the rules are if you stop paying (do you lose all money paid?), and when the company will NOT pay-out, for example in the first 12 months of the arrangement.
- Be careful signing up children. Cover for a young person might end up costing a whole lot more than the future funeral.
- If someone phones you, or comes to your door, selling funeral cover, don't agree to anything. Ask for a copy of the brochure and tell them you'll think about it.
- Talk to someone you trust to get a second opinion before you sign up.
- If you sign-up, remember to make your family aware of what you have paid for and where you keep the paperwork.
The new “Avoid a funeral R.I.P-off” campaign involves all of Australia’s consumer protection agencies. There is a focus on education for Indigenous consumers who are losing a lot of money paying for funerals, either through wrong product choices or bad business behaviour.
A video has been made and is on the Consumer Protection website at www.commerce.wa.gov.au/cp/funerals. The Australian Securities and Investments Commission has extra information at: www.moneysmart.gov.au.
The Australian Consumer Law says all businesses must tell the truth about things they are selling. If you think a funeral product provider has not been honest, email email@example.com or phone: 1300 30 40 54.
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