Difference between funeral insurance and pre-paid funerals

Pre-paid funeral vs. funeral insurance

A pre-paid funeral (sometimes called a funeral plan) allows you to plan and pay for your funeral ahead of time at today's prices, either through a lump-sum payment or instalments.

Funeral insurance pays a lump sum benefit to your family when you pass away regardless of how much you’ve paid or how long you’ve held the policy for. Other covers may also apply that would pay the benefit to you, such as the diagnosis of a terminal illness.

While both options can be a handy way to help take care of funeral costs, they can work out rather differently depending on your plans and financial position. It’s a good idea to speak with your family or a financial adviser to understand how each option could help.

This table compares a typical pre-paid funeral option with OneChoice Funeral Insurance. Keep in mind that every funeral insurance provider is different so we can’t speak for the rest. Most pre-paid funeral plans are organised by the Funeral Directors Association of New Zealand (FDANZ).

Slide to compare >>

	OneChoice Funeral Insurance	Pre-paid funeral
Payout	Fixed amount between $3,000 and $30,000, which is paid to your family or nominated beneficiaries regardless of premiums paid¹	Can be as much or as little as you like, depending on the type of funeral you want to have. Your contributions are transferred to a trust account which accrues interest. Any difference between the actual cost of your funeral and the amount you’ve paid, (plus interest) is returned to your estate
Can be used for	Funeral costs or anything else	Funeral costs only
Eligibility	New Zealand residents aged 18–79 are guaranteed acceptance	No restrictions to set up
Medical/blood tests required	No	No
Tax implications²	Benefit amount is usually tax-free in New Zealand	You may be required to pay tax on any earnings over the amount you paid.
Trustworthy	Yes	Yes

Pros and cons of funeral insurance and pre-paid funeral plans

Both funeral insurance and pre-paid funerals can be suitable options if you’re concerned about the cost of your final farewell. Make sure you consider your personal needs before making a decision as each option comes with its own advantages and disadvantages.

Pros of funeral insurance

The benefit amount is paid as a lump sum and can be used however you or your family decide, like paying for your funeral costs or other end-of-life expenses (outstanding debts, legal fees etc.)
Simple and easy to apply for cover
Some policies offer extra cover for accidental serious injury, accidental death, or cover for diagnosis of a terminal illness

Cons of funeral insurance

Your chosen benefit amount may not be enough to cover the future cost of a funeral, either due to inflation or change of circumstances
Total premiums could potentially exceed your benefit amount

Pros of pre-paid funerals

The cost of your funeral is locked in at today’s prices, regardless of the future cost of funerals
You make arrangements for your funeral in advance, so your family doesn’t need to make these decisions at a difficult time
Any leftover funds after the funeral will go back to your family or estate
Some providers may also help document your final wishes

Cons of pre-paid funerals

Benefit can’t be redeemed for cash or any other purpose if your needs change
Only accessible when you pass away.

OneChoice Funeral Insurance charges no premiums for your policy after you turn 85.

Request a Quote

Other ways to pay for a funeral

If you’re not feeling either of the above options, there are still other fish in the sea. You can also pay for a funeral using:

your personal savings
a Funeral Grant from Work and Income (Te Hiranga Tangata) if you’re eligible³
favours/donations from your friends or community – don’t be ashamed to ask for help!

Take it slow

While it’s always a smart move to plan ahead, don’t rush into it. You should make a decision after speaking to your family/whanau and considering all the available options. Getting some personalised financial advice from an expert can’t hurt either.

Whichever option you go with, we’re here cheering for you to have the best funeral possible. It’s the least you deserve after the performance of a lifetime.

Why not?

Request a Quote

What you get with OneChoice Funeral Insurance:

Your cover, your way

Don’t settle for cover that doesn’t fit right. With OneChoice Funeral Insurance, you can choose a level of cover that works just for you, from $3,000 up to $30,000.

Guaranteed acceptance for New Zealand residents aged 18 – 79

Just ask. We won’t say no. There are no medicals or blood tests needed either.

Fast payout to your family

We pay most claims within 1 business day after receiving the required paperwork. When it’s time for a funeral or tangi, your loved ones can focus on honouring your memory — not paying for it.

Happy 85ᵗʰ birthday

You’re only 85 once, so for reaching the big milestone, we’ll add 25% Bonus Cover to your policy at no additional cost.

No more premiums after age 85

Keep the celebration going, as you’ll no longer have to pay to stay covered (hip-hip, hooray!).

Cover for terminal illnesses

Be ready for life’s curveballs with your benefit amount paid in full if you’re diagnosed with 12 months or less to live (cover is for accidental serious injury and accidental death only in the first 12 months).

Level premiums with no annual increase

There’s no guesswork with OneChoice. Your premiums won’t go up every year¹ so you know exactly how much you need to pay. You can’t get a refund on premiums after the cooling-off period – sorry.

Triple benefit for accidental death

If life catches you by surprise, your loved ones will receive a triple payout of up $90,000. It’s our way of helping you expect the unexpected.

Early Cash Out Option

If you’d rather go your own way, you can end your policy any time after you turn 85 and get 75% of your benefit amount paid to you — no hard feelings. Keep in mind that this payout won’t include Bonus Cover, and you’ll no longer be able to claim as this option will cancel your policy.

Guaranteed cash payout for an even happier 100ᵗʰ birthday

At age 100, we’ll end your cover and give you 125% of your benefit amount to spend any way you like. Not a bad way to celebrate the last century.

Triple benefit for accidental serious injury

You’re covered until the age of 75 if you suffer an accidental serious injury and we’ll triple your benefit amount (up to $90,000). Use it for medical bills, recovery costs, or to turn life’s lemons into lemonade.

Request a Quote

The total amount of premiums payable over the life of the policy has the potential to exceed the cover amount.
This article is for general information purposes and shouldn’t be considered or relied upon as professional or personal advice. If you have legal, tax, or financial questions, you should contact an appropriate professional.
Funeral Grant - Work and Income New Zealand