Life insurance Difference Between Funeral and Life Policies



You may have seen many advertisements in the media concerning various types of long-term insur-ance policies in the market that cover your funeral expenses or to provide for your loved ones once you have passed on. It is always wise to know the differ-ence between these policies as it can help you make an informed decision as to which one to choose.

Funeral policies should not be confused with life assurance policies. Although both policies pay out benefits upon the death of the insured person and may seem the same at first, they are distinctly differ-ent from each other.

A funeral policy is defined in terms of Section 1 of the Long-term Insurance Act No. 5 of 1998 as a contract in terms of which a person, in return for a premium, undertakes to provide on the death of a particular person policy benefits, not exceeding such amount as may be prescribed, consisting mainly of the provision of a funeral for the deceased person or the granting to another person of some other non-monetary benefit, whether or not the policy provides for –

a) The payment, at the option of the insurer or the reinsurer or any other person, of a sum of money in-stead of the provision of such funeral or the granting of such other non-monetary benefit; or
b) The payment of a sum of money in addition to the provision of such funeral or the granting of such other non-monetary benefit,

– and includes a reinsurance policy in respect of such a contract.

Life policy is also defined under Section 1 of the

Long-term Insurance Act as a contract in terms of which a person, in return for a premium, undertakes to –

a) Provide policy benefits upon, and solely for the reason of a life event; or

b) Pay an annuity for a period,

– and includes a reinsurance policy in respect of such a contract.



Funeral insurance is often offered as a long-term in-surance product similar to some life insurance poli-cies. A funeral policy may sometimes expire when you or the life insured reaches a certain age, e.g. at 65 or 75 years. Funeral policies are designed to help your family cover funeral-related costs such as the cost of burial, transport, food or other expenses by decreasing the burden of funeral planning for sur-viving family members. Funeral cost cover may also include embalming, other cosmetology, flowers, a burial plot grave marker and more.

Most insurers pay out funeral policy claims within

24-48 hours of a claim being lodged to ensure that the funeral proceedings take place speedily or as soon as possible, while a life insurance policy may take much longer to pay out.



A life insurance policy on the other hand consists of permanent and temporary life insurance policies, i.e. whole life, term, etc. Just like funeral insurance, a life insurance policyholder agrees to pay a preset amount of money periodically to an insurance com-pany and at death, the insurer will issue a payment to a designated beneficiary.

Life insurance policy can help you protect your fam-ily’s future by providing income to pay expenses such as a mortgage, child or parent care, higher edu-cation, subsidising income and emergency demands that are bound to arise as the household finds its fi-nancial footing. When you pass on, you will leave a legacy either by creating additional wealth for your family or a charity you want to support.

Life insurance may also protect small businesses in various ways, such as covering the loss of a key em-ployee or implement a succession plan.

Let’s also mention that funeral cover and its premi-ums are normally a lot less than that of life policies (obviously depending on the amount of life cover). Life policies can also be ceded to financial institu-tions as guarantees but funeral policies not. You can add other benefits to your life policy such as dis-ability, health, loss of income due to injuries (life events), but funeral policies only cover funeral-re-lated expenses.


Life insurance benefits pay a certain amount of money. If, for example, the life insurance policy that you have has a death benefit of N$1,000,000, your loved ones will receive that balance when you die. They can pay for funeral expenses from those funds or they are free to use it however they wish. The benefits have no restrictions on what you can use the money for.


Funeral insurance is designed to take care of your funeral expenses. This type of coverage can only be used to cover costs associated with funerals. You will not receive a lump sum like you would with in-surance to spend however you would like. You are basically pre-paying your funeral costs before you die. There are strict restrictions on how the money can be used, unlike life insurance.

The advantage of funeral insurance accounts is that it is not generally taxable. It saves you in the long

term and provides you with full peace of mind, knowing that you will not be burdened with any fu-neral costs once you’re covered.


Life insurance has many options to choose from. You can choose a whole life insurance policy or a term policy. Whole life insurance is designed to be a lifetime policy while term only covers you for a certain period of time. You could buy a term policy, live through the term, and exceed the benefits at some point.


Funeral insurance is different from other forms of life insurance in that the only time it pays out any-thing is when you die and it only pays for your burial expenses. Therefore, you do not have many options with funeral insurance – strictly burial activities only.


The last key difference is in the area of accumulat-ing cash value. With certain kinds of life insurance you can accumulate a cash value as you go. With this cash value comes the ability to cash out if you want, thereby forfeiting the death benefit of the life policy. If you need cash, you can access it through withdrawals and policy loans. Bear in mind, though, that interest is charged on loans and while general loans are not taxable, withdrawals usually are.

With a funeral insurance policy there is no cash val-ue that can accumulate. You cannot borrow against it and you cannot cash it out. You simply pay your premiums in installments or pay it all at once and it is only becomes available when you die.

“Financial crises are

like fireworks: they

illuminate the sky even as they go pop.”

– James Buchan

“Your actions are your only true belongings.”

– Allan Lokos