Life insurance: better than funeral insurance to finance your funeral?

She struggles to take off. Owned by nearly 5 million individuals according to France Assureurs, the funeral insurance generated only 1.6 billion euros in contributions in 2021, according to the research firm Xerfi, up 2.3% over one year. This product used to finance his own funeral, however, has not said its last word. “The aging of the population will remain a structural supporting factor. In 2025, the number of seniors aged 60 and over will approach 19 million (i.e. 8.6% more than in 2020)”, continues Xerfi. The excess mortality linked to the health crisis has also constituted an “awareness” of the population. By 2023, the market should thus reach 1.8 billion euros, up 12.5% ​​compared to 2021.

“Over the past twenty years, this product has evolved into a real-life insurance niche. The communication and marketing of large funeral groups have succeeded in breaking the taboo of death and funerals”, believes Michel Kawnik, founding president of the French Funeral Information Association (Afif). Rightly so, because funerals today represent the third item of expenditure in a lifetime, after the purchase of housing and that of the car.” And the big banking groups take the lion's share with almost 50% market share. Among the behemoths, we find Crédit Agricole, CNP assurance and the Banque Postale Prévoyance. The latter holds a portfolio of 350,000 contracts.

Life insurance: a return and fewer costs

Difficult yet to fight with life insurance. The preferred investment of the French – 1.821 billion euros in assets at the end of May 2022 – also has great assets to put forward to finance his funeral. It can already, unlike funeral insurance, boast of generating a return. That of the euro fund, in guaranteed capital, could thus reach 2% in 2022.

However, capital appreciation is also central to funeral contracts. Death intervening several years, even several decades after the subscription of the contract, the cost of the funeral increases in the meantime, while the guaranteed sum will not have changed. The delta easily climbs to 1,500 euros, according to Afif. Generally, the contracts include annual revaluations of the subscribed capital, but it all depends on the mechanism adopted. If it is based on the legal interest rate, be aware that this safeguard is currently two times lower than inflation. At Axa, one of the few insurers to clearly display the color on its site, the death benefit is subject to a guaranteed annual revaluation of 1% net of management fees in addition to profit sharing. The latter, mandatory since 2014, indeed boosts your capital, if profits are made. The advice is therefore to ask the insurer to find out the exact terms of revaluation so that the family does not have to pay a hefty bill in fine.

If it is based on the same tax model as funeral insurance, the life contract is also distinguished by the fees applied. In general, life insurers do not charge anything when withdrawing money, whether the redemption is partial or total. Conversely, a total surrender of a funeral insurance contract ends the coverage and leads to high costs that can reach more than 15% of the sum. The insurance policeman, the Prudential Control and Resolution Authority (ACPR), also regrets that all the costs relating to this type of contract are “rarely presented clearly to the customer”.

Proof of the versatility of the product, life insurance, like the funeral insurance contract, is accompanied by the designation of a beneficiary. He will be responsible for using all or part of the amount bequeathed to organize the funeral. Funeral expenses can also be deducted from the estate up to a limit of 1,500 euros. One detail, however, tips the scales: “With funeral insurance, the family is certain that the money will be used only for the funeral. The subscriber buys them peace of mind,” retorts Jean-Christophe Hamery, Managing Director of La Banque Postale Prévoyance.

Funeral insurance: no advance of costs and defined benefits

On the other hand, life insurance is marred by a black point: it is up to the family of the deceased to advance the sums necessary to organize the funeral, before being reimbursed via the life contract. They can thus ask the bank of the deceased to debit the sums paid, within the limit of 5,000 euros. Funerals are however very expensive – 3,815 euros on average according to the tariff data collected at the end of 2019 by UFC-Que Choisir – and families are far from all able to hold such a jackpot on their account.

Funeral insurance, therefore, has a part to play here. With this product, the deceased ensures peace of mind for his heirs. Over the years, he builds up capital – or via a single payment if he can – which will then be mobilized at the time of his death. These capital contracts ensure, upon the death of the insured, the payment of a sum, generally between 3,000 and 6,000 euros, to the designated beneficiaries. Be careful, however, these funeral covers are not savings contracts, warns the Insurance Mediator, Arnaud Chneiweiss: “At the time of the death of the insured, the total of the contributions he has paid may exceed the guaranteed capital. by contract.” In other words, you will have contributed as a lost fund, and some contracts are not all clear on the matter, alerted the ACPR.

The argument can also be reversed, recalls Jean-Christophe Hamery: “A funeral contract makes it possible to obtain the agreed sum, even if the total of the contributions paid by the individual at the time of his death is lower than the guaranteed capital. What life insurance does not allow. A useful reminder: if during the term of your contract, you do not die, you lose all of your contributions.

Beyond the financial protection provided, and unlike life insurance, funeral insurance can also provide psychological relief. To do this, you will need to take out a service contract, also called a “funeral agreement”. Thanks to this, you will decide on the complete course of your future funeral: coffin, type of ceremony, etc. The insurer will have the obligation to respect the selected company, and the latter will be designated beneficiary of the contract. The capital will therefore be paid to him by your insurance when the time comes.

Unnecessary guarantees…

If you opt for a funeral contract at the expense of good old life insurance, you will have to pay particular attention to the guarantees included. “We estimate that 4 of the 5 large funeral companies include services which, most of the time, are useless and yet double the amount of the contribution”, warns Michel Kawnik. This specialist recalls that 80 to 85% of deaths take place in a care center. If this is your case, hosting the body is free for 3 days.

If the person died at home or in an Ehpad, there too, there is no need to move the body. “However, companies add transport costs before the coffin and entrance fees to the funeral chamber to the estimate,” he continues. Contracts also include what they call conservation or presentation care. The principle: inject into the body liquids composed of formaldehyde. “This product is under moratorium of the European Union and should be banned by 2024”, recalls Michel Kawnik. In other words, the individual contributes for a guarantee that he does not will not be able to benefit within 2 years.

… and valuable assistance

Despite these pitfalls, the assistance provided for in the contract can prove to be very useful. “We act as a trusted third party by helping the individual in his subscription process. For example, we offer a tool for comparing funeral quotes and provide psychological support to the family of the deceased,” explains Jean-Christophe Hamer. The subsidiary of the Postal Bank even offers flower arrangements and maintenance of the grave. For its part, Axa includes in its “Funeral Essen'Ciel” contract the cost of childcare, the provision of psychologists up to 6 months after the death but also the cost of the repatriation of the body in France if the death takes place during a stay abroad. MetLife adds telephone assistance to help the family with the first administrative tasks.

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