Prepaid Funeral vs Funeral Bond vs Funeral Insurance

A prepaid funeral fixes the price of a specific funeral with a specific funeral director today. A funeral bond puts money aside in an investment that can only be used for a funeral. Funeral insurance means paying premiums for a fixed payout, sometimes for decades, and you can end up paying more than the payout is worth. Consumer groups and the funeral industry's own association have warned people away from funeral insurance. Prepaid plans and bonds are generally more sensible, but they have catches: extras that aren't covered, little information for the family, and some risk if the business fails.

Key takeaways

Prepaid: you pay for a set funeral at today's price. It's exempt from the Centrelink assets test if the contract says there's nothing more to pay.

Funeral bond: it's exempt from the assets test up to $15,750 (limit as at 1 July 2025, reviewed every 1 July). It doesn't lock in a price.

Funeral insurance: if you stop paying, your cover usually stops. Premiums can rise over time, and the payout goes to your estate, not to a funeral director.

Youpla, a funeral insurance fund, collapsed in 2022. More than 10,000 Aboriginal and Torres Strait Islander families lost their cover.

Before you sign anything, get a written list of what's not covered.

What's the difference between prepaid, a bond and insurance?

	Prepaid funeral	Funeral bond	Funeral insurance
How it works	You choose and pay for a specific funeral with one funeral director, as a lump sum or in instalments	You invest money with a bond issuer (CHOICE's example was a mutual company). It can only be paid out for your funeral	You pay regular premiums, and your estate gets a fixed sum when you die
Price locked?	Yes, for the items listed in the contract. CHOICE says prepaid plans "lock in the current price"	No. The money grows (or doesn't) with investment returns	No. The payout is a fixed amount, whatever a funeral costs by then
Cost over time	One price, fixed now	Whatever you put in, plus or minus returns	Premiums keep going for as long as the policy runs, and can rise
If you stop paying	Depends on the contract. Ask	Usually nothing is owed, because you invest what you choose	Cover generally ends (CPSA)
If the provider fails	NSW law requires the money to go into a funeral fund. When a business skipped this step, one family lost everything (see below)	The money is held by the bond issuer, not the funeral director	You depend on the insurer staying solvent. Youpla shows what happens when it doesn't
Centrelink assets test	Excluded if the contract lists the services and says there are no more costs to pay	Excluded up to $15,750 (as at 1 July 2025). Joint bonds share one limit	Not covered on the Services Australia page we checked. Ask Services Australia

Sources: Services Australia; CHOICE; CPSA. Centrelink limits are indexed each year, so confirm the current figure with Services Australia.

Is a prepaid funeral worth it? Doing the maths

What locking in the price is worth. Funeral prices have been rising. Across Australia, average cremation costs went from $6,334 in 2019 to $8,045 in 2023, which is about 27% in four years. Average burial costs went from $9,055 to $11,039, about 22% (SBS News). If the items you prepay for are genuinely locked in, that increase is what you avoid. A prepaid price only protects what's written in the contract, though. Even a provider selling prepaid plans has acknowledged that the price guarantee may not always be kept (The New Daily).

The insurance trap, in plain numbers. Here is a hypothetical example. Someone pays $60 a month in premiums. That's $720 a year, $7,200 after 10 years and $14,400 after 20 years. Meanwhile, a no-service cremation in NSW cost about $1,800 to $6,600 in 2021 (IPART). A long life can mean paying far more than the funeral costs; stopping can mean losing the cover. The Consumer Action Law Centre has warned that some policies "start off cheap, only to have premiums rise over time and become unaffordable" (CHOICE).

The Combined Pensioners and Superannuants Association calls funeral insurance "always a rip-off, no ifs or buts" (CPSA). The Australian Funeral Directors Association has said: "We implore consumers to avoid paying for funeral insurance" (The Senior).

What did CHOICE find about prepaid funerals and bonds?

CHOICE's funeral investigation found the "peace of mind" didn't always last:

Extras. One survey respondent said, "I didn't realise that there are extras to pay with prepaid funerals." Anything not listed in the contract, such as flowers, a death notice or catering, may still be billed to the family.
Bonds as a "black hole". One person said of their bond: "it goes into a black hole and you don't have any rights." Another said that "even if you're an executor, you have no access to the information." In that case, the funeral home wouldn't give the family the bond balance. One bond provider explained that after death, the bond belongs to the nominated funeral director.
Business failure. Keith Chew paid a NSW funeral business in instalments from 2002 and finished paying the $3,274 balance in 2005. When he died in 2018, the business had closed and the owners had disappeared. The payments had never been put into a funeral fund, as NSW law requires, and the money was gone.

Source: CHOICE, 2019.

What is the Youpla lesson?

Youpla, trading as the Aboriginal Community Benefit Fund (ACBF), sold funeral insurance and funeral expenses products for almost 30 years. In March 2022, it went into liquidation. More than 10,000 Aboriginal and Torres Strait Islander families were affected, and some had paid "tens of thousands of dollars". Consumer and First Nations groups had warned the government in September 2019 that the fund was about to collapse. Premiums had even been collected through the government's own Centrepay system. Funeral expenses products were later brought under the Corporations Act, following a Royal Commission recommendation (Consumer Action Law Centre). The federal government later announced compensation for affected members (SBS NITV).

The lesson: paying a company for decades to cover one future funeral bill puts all the risk on you. With a prepaid funeral (money placed in a funeral fund) or a bond (money held by a bond issuer), the money set aside is your own. With insurance, you only have a promise from the insurer.

How does each option affect the Centrelink assets test?

According to Services Australia:

Funeral bonds: up to 2 bonds are exempt if your total investment is under the limit ($15,750 as at 1 July 2025) and you have no prepaid funeral. A jointly owned bond counts as one bond, and the limit isn't doubled for couples. Anything above the limit is assessed as a financial investment.
Prepaid funerals: excluded if the contract sets out the services you've paid for and says there are no further costs to pay. This includes a bond assigned to a funeral director.

The limit is reviewed every 1 July, so check the 2026–27 figure before you invest.

Questions to ask before signing

[ ] Is my money held in a registered funeral fund or by a bond issuer? Ask for the name, and ask for written confirmation when it's deposited.
[ ] Exactly what is included and what isn't? Ask about cemetery or crematorium fees, the death certificate, the celebrant, flowers, the death notice and streaming.
[ ] Is the price guaranteed for every item? Which items could still go up?
[ ] What happens if I move (portability), cancel, or the business is sold or closes?
[ ] What cooling-off period applies, and how much is refunded? We couldn't confirm the current NSW prepaid cooling-off rules in an official source, so make sure the contract states them and check with NSW Fair Trading.
[ ] Can my executor see the balance and the contract after my death?
[ ] Does the contract say "no further costs to pay"? This affects how Centrelink treats it.
[ ] Have I compared this with simply leaving money in the estate, and with a direct cremation quote at today's price?

FAQ

Is a prepaid funeral plan worth it in Australia? It can be, if the contract clearly lists what's included, the money goes into a funeral fund, and your family knows the plan exists. The main risks are extras that aren't covered, and a business that doesn't follow the rules.

Does a prepaid funeral affect Centrelink payments or the assets test? A prepaid funeral is excluded from the assets test if the contract lists the services and says there are no further costs to pay. Funeral bonds are exempt up to $15,750 (as at 1 July 2025).

Is funeral insurance a rip-off? Consumer groups like CPSA say yes, and the funeral directors' association urges people to avoid it. Over many years, you can pay more in premiums than the payout is worth, and your cover can end if you stop paying.

Can my family see how much is in a funeral bond? Not always. In one case reported by CHOICE, the executor couldn't get the bond balance. Keep copies of the bond and contract with your will.

Can I cancel a prepaid funeral? That depends on the contract and on NSW rules. Ask what cooling-off period and refund terms apply, and get the answer in writing before you pay.

Plan ahead, without pressure

Compare today's prices first, then decide whether to prepay, invest or save. You can compare published listings filtered by "Pre-planning" and shortlist three funeral directors, then copy our quote checklist to compare like with like. For a non-urgent question, request funeral comparison guidance.

Please note: This article is general information, not financial or legal advice, and it doesn't take your circumstances into account. Before you buy a prepaid funeral, a bond or insurance, read the product documents and speak to Services Australia, a licensed financial adviser or a solicitor. For complaints, contact NSW Fair Trading.

Sources

Independent general guidance. Provider prices, availability, package inclusions and legal obligations may change. Ask for an itemised written quote and verify your own circumstances before making arrangements.

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Prepaid funeral vs funeral bond vs funeral insurance: the maths, the risks and the Youpla lesson

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