Nobody likes to think about their own funeral. But if you're like most Australians aged 50 and over, you've probably thought about it at least once. One worry that often come with is the fear of being a burden on our loved ones.
It's a natural concern when funerals have become so expensive. And with the cost of living rising every year, those expenses aren't getting any smaller.
This is where understanding inflation becomes important. Exploring practical ways to plan ahead can help ensure your loved ones aren't left struggling to cover costs you could have prepared for. That’s we’ve decided to explore how inflation affects funeral costs and what you can do about it today.
What Is Inflation?
Think about the price of a cup of coffee. Twenty years ago, you might have paid $2.50 for a flat white. Today, that same coffee costs closer to $5.00 or more.
Your dollar doesn't stretch as far as it used to. And they'll likely cost even more in another ten years. Inflation affects everything from groceries to petrol to medical care and funeral costs too.
The Reserve Bank of Australia's inflation calculator shows just how much costs have risen over the years. It's a useful tool to see how the value of money changes over time.
Why Does This Matter for Funeral Insurance?
If you take out funeral insurance today for $10,000, that amount is based on today's funeral costs. But when your policy eventually pays out—whether that's in 10, 20, or 30 years—funeral costs will likely be higher.
This is why it's worth thinking about inflation when planning your funeral insurance coverage.
How Does Inflation Impact My Policy?
Inflation impacts your funeral insurance policy in two main ways.
The Value of Your Cover
The first impact is on the value of your cover. If you take out $8,000 in cover today, that amount will remain the same when the policy pays out. But what that $8,000 can buy does change.
If a basic funeral costs $8,000 today but costs $13,000 in 15 years, your cover won't stretch as far. There might be a gap that your loved ones need to cover at an already difficult time.
Your Premium Costs
The second impact is on your premiums. Some funeral insurance policies increase premiums over time to account for inflation and increasing age. Others keep premiums level.
With Dignity Funeral Insurance, you have clarity. Your premiums are designed to remain affordable. And, if you’re a non-smoker, you’ll enjoy lower premums.2
Not only that, but from the policy anniversary following your 90th birthday, premiums are no longer payable, but your cover will continue for life.
How to Take Inflation into Account in Your Life Insurance
Taking inflation into account doesn't need to be complicated. Here are some simple strategies:
Start with Current Costs
First, work out what a funeral costs today. Moneysmart provides helpful information about paying for funerals, including what's typically included in funeral costs.
Add a Buffer
Consider adding a buffer to your cover. If a funeral costs $10,000 today, you might take out $12,000 or $15,000 in cover. This extra amount acts as a cushion against future price rises.
Dignity Funeral Insurance offers cover up to $15,000,1 which can provide that important buffer for your family.
Review Every Few Years
Your needs and costs change over time. It's sensible to review your funeral insurance every few years. This helps ensure your cover still matches your needs and current funeral costs.
You don't need to do this every year. But checking every 3-5 years can help you stay on track.
Do I Need to Take Out More Coverage?
This is a personal decision. It depends on several factors.
Consider taking out more coverage if:
- You took out your policy many years ago
- Funeral costs in your area have risen significantly
- You want to cover additional expenses beyond the basic funeral
- You want to leave extra to help with other end-of-life costs
Your current coverage might be fine if:
- You recently took out or reviewed your policy
- You chose a higher amount to begin with
- Your family has other resources available
- You've made other arrangements (like a prepaid funeral)
The important thing is not to worry unnecessarily. But it is worth checking that your cover still meets your needs.
How Much Do Funerals Cost?
This is probably the most important question. After all, you can't plan properly without knowing the numbers.
In Australia today, the average funeral typically costs $8,202. A more comprehensive funeral can cost as much as $15,000 to $23,000. This might include:
- Funeral director's services
- A quality coffin
- Transportation
- Venue hire for the service
- Flowers
- Death certificates and paperwork
- Cremation or burial fees
Some funerals cost even more, depending on personal preferences and location. Metropolitan areas often have higher costs than regional areas.
The Hidden Costs
Beyond the funeral itself, there are often additional expenses:
- Memorial services
- Wake or refreshments
- Headstones or memorial plaques
- Travel costs for family members
- Time off work for grieving family
- Legal and estate administration
These can add thousands more to the total cost.
How Much Have They Increased in Recent Years?
Funeral costs have been rising steadily. Over the past 20 years, the cost of an average funeral in Australia has roughly doubled. A funeral that cost $6,000 in 2004 might cost $12,000 or more today. That's an average increase of about 3-4% per year, which is roughly in line with general inflation, though some years see bigger jumps.
Looking forward, there's no reason to think funeral costs will stop rising. If anything, limited cemetery space in urban areas might push costs higher.
How Can I Increase My Coverage but Keep the Cost Down?
If you're worried your current cover isn't enough, you have options that won't break the bank.
Take Out Additional Cover Now
The earlier you increase your cover, the lower your premiums typically are. Adding to your cover while you're younger and healthier usually means more affordable premiums than waiting until you're older.
With Dignity Insurance, Australian residents aged 50-80 can apply over the phone. No medical exams or blood tests are required. This makes it straightforward to increase your cover.
Choose Your Amount Carefully
Dignity Insurance lets you choose your cover amount between $3,000 and $15,000. You don't need to take out the maximum if you don't need it.
Work out what amount makes sense for your situation. Perhaps you already have some savings set aside. Or maybe you've made some prepaid arrangements. Choose cover that fills the gap between what you have and what you need.
Compare the Cost of Waiting
It might be tempting to wait to increase your cover. But waiting often costs more in the long run. Premiums are typically based on your age when you apply. The older you are, the higher the premium.
Taking out appropriate cover now, may be more affordable than waiting and paying much higher premiums later.
Talk to Your Family
Sometimes the best way to keep costs down is to be honest with your family about your wishes. Perhaps you don't need an elaborate funeral. Maybe you prefer a simple service.
These conversations can be difficult. But they're important. They help ensure your funeral reflects your wishes without unnecessary expenses.
Do Funeral Insurance Policies Go Up with Inflation?
This varies by insurer and policy type. There are generally two approaches:
Level Premium Policies
Some policies keep your premium level, like Dignity Funeral Insurance. You pay the same amount every month from the start of your policy and you can increase or decrease your benefit amount when it suits.
Increasing Premium Policies
Other policies have premiums that increase over time. This includes policies like Golden Life Insurance. This might help to account for inflation, your increasing age, or both. The potential advantage is that your cover amount might increase too, though this varies by policy.
What to Do Next
If you're concerned about funeral costs and inflation, here are some practical next steps:
Review your current situation: Do you have funeral insurance? If so, when did you take it out? Is the amount still appropriate?
Check current costs and look at what funerals cost in your area today. This gives you a baseline.
It’s also important to talk to family and have honest conversations about your wishes and their expectations.
Additional Support and Resources
When the time comes, there are resources to help your family navigate what needs to be done. The Australian Death Notification Service has some useful information about notifying government agencies and managing practical matters after someone passes away.
But the financial side—the cost of the funeral itself—is something you can plan for today with funeral insurance.
Covering Funeral Costs the Dignified Way
At Dignity Insurance, we understand that thinking about your funeral isn't easy. But we also know how important it is to many Australians to not leave their loved ones with financial stress during an emotional time.
Whether you need to take out new cover or increase existing cover, Dignity Insurance makes it straightforward.
You can arrange everything over the phone in just a few minutes. Our Australian-based team is here to answer your questions and help you choose the right amount of cover. Simply give us a call on 1800 089 426 or get a quote. We’re here to help.