Funeral Insurance, Pre-Paid Funerals and Funeral Bonds Compared
A plain comparison of the three main ways Australians pay for a funeral in advance: funeral insurance, a pre-paid funeral and a funeral bond. How each works, what Moneysmart and ASIC warn about, and how each is treated for the pension.
By Andrew M, reviewed by Anne G · Last updated 8 October 2026 · Editorial standards
Key points
- A pre-paid funeral locks in today's prices for the funeral you choose, with a set funeral director.
- A funeral bond is money invested to pay for your funeral, and is treated favourably for the pension up to a limit.
- Moneysmart warns funeral insurance can cost a lot more than the benefit your family receives.
- With funeral insurance, if you stop paying, the cover usually ends and you lose what you've paid.
- Check what the money covers, what happens if you move, and whether you can get it back.
Many Australians want to take the cost of their funeral off their family's hands. There are three main ways to do it: funeral insurance, a pre-paid funeral and a funeral bond. They work very differently, and one in particular has drawn warnings from Moneysmart and ASIC. This guide compares all three in plain terms.
The Three Options at a Glance
| Pre-paid funeral | Funeral bond | Funeral insurance | |
|---|---|---|---|
| What it is | A contract for a set funeral, at today's prices | Money invested to pay for a funeral later | Insurance that pays a set amount when you die |
| Who you deal with | A funeral director | A bond provider | An insurer |
| Price certainty | Yes, for what's in the contract | No, the value depends on investment returns | No, the payout is fixed but the funeral cost isn't |
| Things to check | What happens if you move, or the funeral director closes | Whether returns will keep up with funeral prices | Whether premiums could add up to more than the benefit |
| Pension assets test | Exempt if fully paid, with no limit | Exempt up to a limit | Ask Services Australia how your policy is treated |
What Is a Pre-Paid Funeral?
A pre-paid funeral is a contract with a funeral director for a specific funeral, paid in advance. Moneysmart explains that it locks in today's prices, and can cost less than funeral insurance or a funeral bond.
The rules protecting your money depend on the state. In NSW, money paid for a pre-paid funeral must be held in a fund registered with NSW Fair Trading. In Victoria, Consumer Affairs Victoria requires the contract to be in writing with the total cost, and the money must be invested within a few business days.
Can you cancel a pre-paid funeral? It depends on the contract and the state. Read the cancellation terms before signing, and ask what you would get back. In NSW, pre-paid funeral money must be held in a fund registered with NSW Fair Trading.
Questions to ask before signing a pre-paid funeral:
- Exactly what's included, and what isn't (for example, cemetery fees or a death notice)?
- What happens if I move to another town or state?
- What happens if the funeral director closes or is sold?
- Can I change my plans later, and is there a fee?
- How is my money held, and can I see the fund's registration?
What Is a Funeral Bond?
A funeral bond is an investment set aside to pay for your funeral. When you die, the money is released to pay the funeral costs. Unlike a pre-paid funeral, it isn't tied to a particular funeral director or price, so its value depends on how the investment performs.
Do funeral bonds affect the age pension? Funeral bonds are exempt from the pension assets test up to a limit, which Services Australia reviews each 1 July. If you invest more than the limit, the whole bond counts. A fully paid pre-paid funeral has no limit.
Services Australia sets the exempt limit for a funeral bond at $16,250 from 1 July 2026. Check Services Australia's page for the current figure before you invest, as it changes each year.
What Is Funeral Insurance?
Funeral insurance pays a set amount, often to your family or the funeral director, when you die. You pay a regular premium for as long as the policy runs.
Moneysmart and ASIC have both raised concerns about it:
- Moneysmart warns that funeral insurance can cost you a lot more than the benefit your family will receive. In one Moneysmart example, a man paid more than $20,000 in premiums, but his funeral cost only $10,000.
- Moneysmart says that if you stop paying the premiums, the insurance is cancelled and you lose all the money you've already paid.
- Premiums often rise with age. In ASIC's 2015 review, average yearly premiums rose from $336 for people aged 50 to 54 to $1,344 for people aged 80 to 84.
- In the same ASIC review, cancellations in a year equalled 80% of new policies sold, and more than half of those cancellations happened in the first year.
Is funeral insurance worth it? It depends on your age, health and how long you might pay premiums. Moneysmart warns that funeral insurance can cost a lot more than the benefit your family receives, and that if you stop paying, the cover is cancelled and you lose what you've paid.
If you're considering funeral insurance, ask:
- What will I pay in total if I live another 10, 20 or 30 years?
- Do premiums rise as I get older (stepped premiums)?
- What happens if I can't keep paying?
- Is there a waiting period before the full benefit applies?
- Do I already have life insurance, perhaps through my super?
How Do You Choose?
What is the difference between a pre-paid funeral and a funeral bond? A pre-paid funeral is a contract with a funeral director for a specific funeral at today's prices. A funeral bond is money invested to pay for a funeral later, which isn't tied to a particular funeral director or price.
A rough guide:
- If you know what you want and where you'll live, a pre-paid funeral gives the most certainty.
- If you want flexibility, or might move, a funeral bond keeps the money set aside without tying you to one provider.
- If you're thinking about funeral insurance, compare the total premiums you might pay with the benefit, and read Moneysmart's warnings first.
- Plain savings set aside for the funeral also work. Tell your family where the money is and how to reach it.
Whatever you choose, tell your family and keep the paperwork where they'll find it. A plan nobody knows about can't help.
Next Steps
Our guide to how much a funeral costs explains what makes up the price, so you know how much to set aside. If you're helping a family now, How to Pay for a Funeral When There's No Money Saved covers the options, and Can You Use Superannuation to Pay for a Funeral? explains how super death benefits work.
For the whole picture, see our step-by-step guide to planning a funeral in Australia. And if this is all coming at a hard time, our page on grief support in Australia lists free services you can call.
Frequently Asked Questions
Is funeral insurance worth it? It depends on your age, health and how long you might pay premiums. Moneysmart warns that funeral insurance can cost a lot more than the benefit your family receives, and that if you stop paying, the cover is cancelled and you lose what you've paid.
What is the difference between a pre-paid funeral and a funeral bond? A pre-paid funeral is a contract with a funeral director for a specific funeral at today's prices. A funeral bond is money invested to pay for a funeral later, which isn't tied to a particular funeral director or price.
Do funeral bonds affect the age pension? Funeral bonds are exempt from the pension assets test up to a limit, which Services Australia reviews each 1 July. If you invest more than the limit, the whole bond counts. A fully paid pre-paid funeral has no limit.
Can you cancel a pre-paid funeral? It depends on the contract and the state. Read the cancellation terms before signing, and ask what you would get back. In NSW, pre-paid funeral money must be held in a fund registered with NSW Fair Trading.
This guide is general information for people in Australia, not financial advice. Figures were checked against the sources below on the date shown, and we review this guide every six months. How we write and check our guides is set out in our editorial standards.
Sources
- Moneysmart (ASIC), Funeral insurance (checked 8 October 2026)
- Moneysmart (ASIC), Paying for your funeral (checked 8 October 2026)
- ASIC, REP 454 Funeral insurance: A snapshot (checked 8 October 2026)
- Services Australia, Funeral bonds and prepaid funerals (checked 8 October 2026)
- NSW Fair Trading, Funerals (checked 8 October 2026)
- Consumer Affairs Victoria, Pre-paid funerals (checked 8 October 2026)
About the author
Andrew M covers the practical and technical side of memorial video planning for Mixtape Memories, including photo counts, file formats, venue requirements and the DIY-versus-professional decision. The focus is on getting the details right ahead of time, so families don't have to think about them on the day.
Reviewed by Anne G.