Funeral expenses a fact of life

ONE-OFF EXPENSE: Without a plan in place, you could leave friends and relatives with a hefty bill.
ONE-OFF EXPENSE: Without a plan in place, you could leave friends and relatives with a hefty bill.

We interrupt the cheer of the festive season to remind you that you're going to die.

If you thought Christmas spending was a strain on the bank account, the cost of your funeral will see you turn in your freshly dug grave.

Sure, death is a one-off expense (unless you believe in reincarnation) but it can easily set you back more than $10,000.

If you pop your clogs without a plan in place, you could leave friends and relatives picking up the tab.

And that can be quite an impressive bill.

The headstone alone starts from around $1000, while the coffin will usually cost at least the same again.

Add another $500 to $700 for embalming, and $1200 to $3000 for council burial fees.

That's not to mention the flowers, service, celebrant, venue, death notices and other sundry expenses, says Funeral Directors Association president Eion McKinnon.

"My average funeral would be somewhere in the vicinity of $9000, today."

Of course, your final send-off doesn't have to be an extravagant affair. The most crucial factor is whether you opt for a burial or cremation.

Cemetery plots have become hot real estate in some cities, with already heavily subsidised prices soaring.

Souly Cremations is a new entrant to the market, specifically targeted at those who want a more affordable disembarkment from the realm of the living.

"A lot of people are a bit more open to a crematorium now," says managing director Aleisha Morris.

One lady who phoned her recently had spent $12,000 burying her father.

"I think people are kind of realising it's crazy to spend that much on a funeral."

Souly Cremations' cheapest, no-frills package costs $1795- which gets you a basic casket, all the documents and return of the ashes.

Rather than paying big money for funeral ceremonies, Morris says families are increasingly conducting DIY affairs.

"We'll give them the ashes back, and they'll have a memorial service at an RSA or a barbecue at home, or just whatever they're wanting to organise," she says.

"Everyone's really different, but definitely the cost side of it is a major."

If you know you're leaving enough money behind to cover your affairs, you might not be worried about putting relatives under pressure.

But bear in mind that it can be months between your death and the actual settlement of your estate.

Funeral homes are running a business, says McKinnon - they have to get paid too.

If they don't, some will charge a monthly fee or interest on the unpaid bill after a certain period.

This means families often do have to come up with the cash, and at quite short notice if the death was unexpected.

So what can you do to make sure your death is as stress-free as possible for grieving relatives?

Relying on government assistance is not a good idea.

Work and Income will pay up to a maximum of $1971, which is reduced by every dollar you have to your name.

"The WINZ grant is means-tested, and of course it doesn't go very far at all," says McKinnon.

Theoretically, it could cover the most basic cremation with no service, but it's not always easy getting the money.

Then there's insurance, usually marketed with a tug at the heartstrings of how you need to protect your family.

"At the moment there's a huge push by insurance companies for people to take out policies," says McKinnon.

The Insurance and Savings Ombudsman (ISO) scheme is not a big fan of funeral plan cover.

In one of the cases it investigated, a pensioner's premiums were hiked to the point where she could no longer afford to pay them.

She had already paid more than $3000 - which was more than the actual sum she was insured for. 

The ISO calculated that if she made it to the age of 90, she would have ended up forking out a further $10,800.

And yet the brochure the company sent her claimed she could "protect [her] family from less than the cost of a cup of coffee".

"The ISO Scheme is particularly concerned about the emotional nature of the marketing around these policies and whether consumers' attention is drawn to the fact that the premiums paid may exceed the benefit payable," the ISO says.

Consumer New Zealand suggests you check you're not already covered.

Some companies provide up to $15,000 for funerals in standard life insurance products, so you don't need to buy a separate policy.

Another option is the pre-paid funeral, which makes up a small but significant part of the market.

McKinnon couldn't say how much exactly, but says its popularity has been reasonably steady over the last 10 years or so.

Unlike insurance, the money you contribute to a pre-paid plan funeral trust is set aside for your death, regardless of whether you stop contributing.

Funeral-link, a scheme endorsed by McKinnon's organisation, offers two options.

You can take out a fixed plan, which locks in the funeral services you want at today's prices.

That carries a set-up fee of $400 plus GST, and is only available for cremation.

Otherwise you can get a non-fixed plan with a set-up fee of $150, plus GST.

The funds you contribute are drawn down to pay for services in the prices of the day, with any extra costs or surpluses returned to the estate.

With administration fees of $50 plus GST every year or part-year, it's still not necessarily a very cost-effective option.

If you had the prescience to fix a sum of money 15 years before you actually died, you'd be rewarded with fees of something like $1300.

Consumer NZ also warns that if you change your mind about signing up, it's hard to get your money out.

"These plans aren't for everyone and there are simpler ways of funding your final farewell," it says.

One alternative option might be to set up a savings account or pool of money clearly earmarked for funeral costs.

At the very least, you have to give the morbid topic some thought.

Encouragingly, most of us are.

McKinnon has two decades' experience in the industry. "Our contemporary generations are much more open to talking about this," he says.

"They ask questions, they want to know - and we're very willing to provide those answers."

Fairfax Media