Funeral Insurance and Prepaid Funerals Explained
By James MacLeod – Managing Director, Tobin Brothers Funerals
Planning ahead for your funeral can give you time to consider what matters to you and make practical arrangements for the people you love.
There are various options when it comes to planning your funeral ahead of time, and the distinctions between them can be confusing, particularly when funeral insurance and prepaid funerals are sometimes described in similar terms though they work differently.
Understanding what you are paying for, how much it may cost over time and what your family will receive can help you make an informed choice.
Recent attention from Australia’s financial regulator is a timely reminder to look closely at these differences.
If you are considering Funeral Insurance, make sure that you understand the terms of the policy and carefully read any product disclosure statement. If in any doubt at all about what is covered by the terms of the policy (and perhaps more importantly, what is not covered) seek independent legal advice.
Why funeral insurance is receiving renewed attention
In October 2026, Insurance News reported that the Australian Securities and Investments Commission (ASIC) plans to review funeral insurance practices.
In its supervisory letter dated 30 September 2026, ASIC says it continues to receive reports from the Australian Financial Complaints Authority and consumer groups about funeral insurance, particularly where costs exceed benefits. The review is expected to begin in the second half of the 2026–27 financial year, meaning January to June 2027.
For people considering their options, this reinforces the value of asking questions before committing to a product.
“Funeral insurance does not itself arrange or prepay a funeral” says James MacLeod OAM, Managing Director of Tobin Brothers Funerals.
“Funeral insurance does not itself arrange or prepay a funeral”
How funeral insurance works
Funeral insurance generally involves paying regular premiums for a benefit payable when you die, subject to the policy’s terms. It provides money towards funeral expenses rather than purchasing agreed funeral services in advance.
ASIC’s Moneysmart funeral insurance guidance highlights several things to consider:
- Premiums may rise over time and become harder to afford, particularly in retirement.
- The total premiums paid may exceed the benefit your family receives.
- Cancelling a policy or being unable to maintain payments may mean losing cover and the money already paid.
- Exclusions and qualifying periods can limit when benefits are payable.
- A payout may take time, while funeral expenses need to be met sooner.
Conditions differ between policies, so it is important to read the product disclosure statement and understand any premium caps, benefit guarantees or exclusions.
We have explored these concerns in our earlier articles, Funeral Insurance Traps for the Unwary and Funeral Insurance Pitfalls. These provide background on why understanding the product you choose matters.
What a Fixed Price Funeral Plan offers
A Tobin Brothers Fixed Price Funeral Plan is a prepaid funeral. You work with our team to choose your arrangements, record your wishes and agree on the services included in your contract.
The price of those specified services is fixed, protecting against future price increases for the services you have purchased. Once the plan is fully paid, there are no ongoing insurance premiums.
This gives you a defined total price and a clear record of what has been arranged. For your family, it can reduce the financial burden and the number of decisions they need to make after your death.
Planning ahead also gives you the opportunity to establish a relationship with the funeral director who will support your family and deliver the agreed arrangements.
The contract is central to that certainty. Our team can explain the inclusions, any services outside the agreement and the applicable cancellation and transfer conditions. If your family later requests additional services, these may involve extra costs.
Making your wishes known
Prepaying a funeral also creates space for a conversation about your preferences, whether you have clear ideas or would like guidance.
You might want to record particular music, cultural or religious traditions, or the kind of gathering you would prefer. Discussing these choices with those close to you can help them understand what matters to you.
Your family will still have a role in your farewell, but having your wishes documented can give them a helpful starting point.
More information about our Fixed Price Funeral Plans is available on our website.
Understanding the pension benefits
A fully paid prepaid funeral that meets the relevant requirements can be excluded from the Age Pension assets test.
Services Australia explains that the contract must set out the services paid for and confirm there are no further costs to pay. Qualifying prepaid arrangements are also outside income assessment and deeming, so the prepaid amount does not itself reduce pension entitlement.
This does not mean everyone will receive a higher pension. Any effect depends on your circumstances and the arrangement meeting the applicable rules. Standalone funeral bonds have different assessment rules and should not be confused with a fully paid prepaid funeral.
Before proceeding, speak with your accountant or financial adviser and confirm the treatment of your arrangement with Services Australia.
Taking the next step
“These reports give us an opportunity to help families make informed decisions,” says James MacLeod OAM.
If you would like to explore planning ahead, our team can talk you through a Fixed Price Funeral Plan, explain the contract and answer your questions. Call 13 19 34 or learn more about our prepaid funeral plans.
This article provides general information only and does not constitute personal financial advice. Speak with your accountant or financial adviser about your circumstances before making a decision. Pension eligibility and assessment depend on the applicable rules and your individual situation.
“These reports give us an opportunity to help families make informed decisions”
