Funeral insurance comes to Nova Scotia: What you need to know
Understanding the insurance policy is key to make you have the coverage you expected
Nova Scotia has become the first Atlantic province to allow residents to purchase insurance in funeral homes to fund prearranged funerals, but there are questions that need to be asked before signing up.
In some cases, if the person dies too soon or you don't declare a pre-existing condition, you may not have the coverage you expected.
The province says the change, which was implemented on Sept. 1, offers more options and reduces red tape for funeral homes.
But it hasn't "reinvented the wheel," according to Adam Tipert, owner of Sweeney's Funeral Home in Bridgewater and chairman of the Nova Scotia Board of Registration of Embalmers and Funeral Directors.
"We've always had prefunded funerals in Nova Scotia with a trust company."
Funeral home trust vs funeral insurance
That allowed people to preplan their funeral and prepay funeral homes, either in full or installments. The money was placed in trust, guaranteed to cover funeral expenses and protected until the person died.
"All we're doing now is looking at the option of instead of funneling all those monies to a trust company we can now send it to an insurance company and they can look after the financial aspects of it," Tipert said.
Rodger Gregg, registrar of Cemetery and Funeral Services with Service Nova Scotia, said funeral insurance can mean more manageable payments "that can make it easier to afford a prearranged funeral."
In line with 6 other provinces
He said the change was made at the request of the funeral and insurance industries to bring Nova Scotia "in line with the rest of the country." Currently, B.C., Alberta, Ontario, Saskatchewan, Manitoba and Quebec all allow it.
"It's a type of life insurance," according to Michael Smith, Nova Scotia district manager for Canada Purple Shield insurance. He said all insurance is based on risk.
"The older we are the greater chance we have of death," he said. "The younger we are the less chance we have of early death so yes, age, the amount of the policy, the term that you're paying it for, those are all factors."
Not as simple as saying, 'Yes, I want coverage'
There are different kinds of policies and they vary from insurance company to insurance company.
Some of the policies are "term," meaning they exist only for the designated timeframe and, unless they're renewed, will disappear with no payout during that time if the person remains alive.
Other policies are "whole life" where the person pays a premium until they die.
That means people need to understand which policy is best for them, its limitations, and whether it's guaranteed to cover their final costs.
Smith said funeral insurance can be bought online but "just because it's the lowest price doesn't mean it's always the best product."
He said people should shop around, buy from reputable companies and make sure funeral homes will accept the insurance .
He says reputable insurance companies are insured through Assuris, which will pay out a significant portion of the policy if the insurance company goes out of business.
Are there limitations?
He said many life insurance companies have some kind of limitation period and may not pay a policy if the person dies in the first two years. Instead, they will simply return the premiums that have been paid.
Some require health questions, which he says must be answered honestly in order to prevent the company from voiding the policy at a later date.
If the policy names the funeral home as "the assignee" of benefits, it's important to clarify that any funds not needed for the funeral will be returned to the family.
It's also important to understand what will happen if you miss a payment and whether the policy be cancelled by the insurance company.