Funeral expenses can be burdensome and overwhelming – this is why funeral polices are the most popular insurance products in South Africa. Funeral policies are designed to offer a financial safety net to families during a very stressful time. They enable people to honour and bury their loved ones with dignity, and without facing financial ruin. They play a critical role in providing financial security during times of loss.

Here are a few things to consider when buying funeral cover.

1. Get the right amount of cover for your needs

The South African insurance market offers a variety of funeral policies, each designed to meet different needs and budgets. Determining the right amount of funeral cover involves several considerations. First and foremost, it is essential to estimate the actual costs associated with a funeral, including basic expenses like burial or cremation, as well as additional costs such as catering, transportation, and memorial services. Understanding these costs helps in deciding on a cover amount that will adequately meet the family’s needs without over-insuring.

2. Choose a policy with premiums you can afford

Affordability plays a crucial role in getting funeral cover. Policyholders must consider their financial situation and ensure that the premiums are sustainable over the long term. It is better to have a modest but affordable policy than committing to a high-premium policy that may become unaffordable, leading to lapses in cover when clients need it most.

3. Pay your premiums to ensure you and your loved ones are covered

It’s essential that clients pay their premiums monthly if they want to ensure that they keep their cover. Not doing so can result in devastating consequences. If a client doesn’t pay their premiums for a certain number of months (commonly, two or three consecutive months), their policy will lapse or get cancelled, and they’ll lose their cover. For example, a client has a funeral policy for three years, and they don’t pay their premiums for a couple of months. One of the people covered on the policy passes away during the second month that the client hasn’t paid premiums. In this situation, the client won’t qualify for a pay-out from the funeral parlour as they’ve missed two premium payments.

It’s essential with any insurance product that the client keep up with their premiums to continue enjoying cover.

4. Understand the terms and conditions

Ensure that you understand how your funeral policy works. This includes pay-outs, waiting periods and exclusions to name but a few. Most funeral policies have a waiting period before a client can claim for death due to natural causes, for example, six months. Death as a result of suicide typically carries a 12-month waiting period. This means that the funeral parlour won’t pay out if any of the people covered on the policy die as a result of suicide in the first year of the policy.

Speak to your funeral cover representative to make sure that you understand exactly how much you’ll pay, how much you’re covered for, who is covered, and when the cover will pay-out.

With interest rates holding steady at 11.75%, it’s not unexpected that consumer credit reporting company Experian reveals that more people are struggling to repay their loans compared to 2023. According to Experian’s Consumer Default Index (CDIx), home loans reported the largest deterioration with a 21% drop year on year. 

“Although higher interest rates certainly explain why more homeowners may be struggling to keep up with their bond repayments, there are several other factors that may contribute to homeowners defaulting on their loans,” says Bradd Bendall, Head of Sales at BetterBond. 

1.                       There’s more to buying a home than just the bond

The value of your bond is calculated based on your income and expenses. However, there are additional costs associated with buying a home that need to be considered before you sign an Offer to Purchase, says Bendall. Using an affordability calculator can also help you understand how much you can comfortably afford on a home loan. 

A transfer duty is payable each time a property changes ownership. This cost depends on the value of the property.

Transfer costs are also payable to the transferring attorneys. This is calculated on a sliding scale, based on the purchase price. Furthermore, bond registration fees are payable to the bond attorneys who register a bond at the Deeds Office. These vary from firm to firm (but are based on recommended tariffs) and will depend on the home loan amount. In short, transfer costs cover the transfer from seller to purchaser, while the bond registration costs are the tariffs charged to register the property in new purchaser’s name.

Bond initiation fees will also be payable to the bank for processing your home loan application. This can be included in the bond or paid to the bond attorneys along with your bond registration fees. 

There are also variable costs such as FICA fees, electronic instruction fees and courier costs for documents related to the sale. 

If these are not considered as part of the costs when applying for a bond, they can place considerable financial strain on a buyer during the first few months of the bond repayment process, says Bendall. 

2.                       Ongoing running costs 

As a homeowner, you are responsible for paying for municipal services such as water and electricity. You will also be liable for municipal property rates –for services such as sewerage, roads upkeep, electrical infrastructure, streetlight maintenance and refuse collection. “If you have not allocated money in your monthly budget for these expenses, it may become increasingly difficult to pay for the bond and for municipal services,” adds Bendall. It is important to pay these accounts on time to avoid legal action or the property being sold to clear the debt. 

3.                       Keeping your home in good nick

A home will only appreciate in value and serve as a long-term investment, if you keep it well maintained. This means having money available to maintain the garden and outside area, and to repair any snags that may arise. Seasonal repairs such as the clearing of gutters or cleaning of the swimming pool can also become quite costly if neglected. A major repair, such as the replacement of a roof or electrical rewiring, can be very costly and could result in the inability to pay for the work as well as the monthly bond. 

4.                       Peace of mind at a price

Many financial institutions insist on homeowners’ insurance at home’s replacement value – the amount it would cost to rebuild if destroyed. These premiums are usually debited annually to the bond account, but it can also be paid separately, explains Bendall. A buyer should also have short-term insurance to cover the loss of their home’s contents if there is a fire, flood, other natural disaster or a crime. Additional costs may include a monthly subscription to a security company or neighbourhood watch programme. 

5.                       Bending the truth

Unfortunately, homeowners often default on their bond repayments because they have been untruthful or ambiguous when submitting their financial statements. “It’s imperative to be as accurate as possible when providing your financial statements, as your income and expenses will determine how much you can afford to pay each month on your bond.”

Applying for pre-approval will give you a good indication of what the banks will be willing to offer based on your affordability. However, consider buying a home valued at less than the bond amount offered, as this ensures that you will have some additional funds available to cover the hidden and unexpected costs associated with owning a home, advises Bendall. 

“Buying a home involves many costs in addition to the actual bond, so make sure you have a clear idea of what you can realistically afford to spend when you purchase the property, how much you can afford to pay each month and the financial reserves you have set aside if there are unforeseen expenses such as repairs or unexpected damages,” he says. Doing this will ensure that you can meet your bond repayments and avoid defaulting on your loan.