Normally, taking out a policy for yourself and your partner is enough to protect those closest to you should the worst happen.
However, there may be instances where covering a family member who is dependent on you financially is needed. This is where third-party funeral insurance comes in.
It’s important to speak with a reliable financial services provider who can guide you through the complex funeral policy requirements.
For third-party funeral cover there are three aspects that every person needs to understand:
Can I take out a funeral insurance policy on someone else?
If you’d like to take out a funeral insurance policy on someone else you first have to prove you have an ‘insurable interest’ in the person you want to cover.
Elaine Markus, Standard Bank’s head of Life Insurance Propositions and Strategy said: “Insurable interest is the relationship that exists between the premium payer and the person whose life is being insured. Put simply, this means that before you can take out funeral insurance on anyone, you need to make sure that an accepted relationship exists – for example, with an uncle, sibling, or business partner – and if that person were to suddenly pass away, you would be under increased financial pressure.”
Proof of this relationship and evidence on the financial dependency will be required to prove insurable interest.
For third-party funeral cover, the premium payer is responsible for the payment of the monthly premium and has no ‘rights’ to the policy, unless the life insured nominates the premium payer, as the beneficiary. However, payment of premiums remains the responsibility of the life insured, even if premiums are being paid on their behalf by you.
As the owner of the policy, the life insured (your sibling, uncle etc.) will be the policy polder and the contract will be between the insurer and the life insured.
Is it possible to take out a funeral policy without the insured person knowing?
The simple answer to this is no. You, as the premium payer and the life insured need to be available for application to contract for the funeral insurance policy.
The only exception to this is where parents include minor children to their policies or, where an adult has been incapable of managing their own affairs and there is the relevant Legal Power of Attorney.
According to Markus, it’s considered insurance fraud to insure someone else’s life without their knowledge and consent.
What are the pros and cons?
By taking out a funeral insurance policy on someone else, you’re taking on an extra expense by paying monthly premiums to cover another person.
However, the reward will be peace of mind and appropriate cover if you need it.