With so many expenses to worry about in our day-to-day lives, the cost of death is usually the last thing on our minds. But it’s still a very important topic we all need to consider.
Death in Australia can be expensive and the cost your loved ones are likely to pay will vary greatly depending on a number of factors including how they died, how old they are and the financial situation they were in before passing away.
In this article, we’ll discover how much it costs to die in Australia and consider these costs compared to the price paid for life insurance policies.
The Process Following a Death
Before we get into costs, it is important to know exactly what needs to occur after someone dies in Australia. The Australian Government’s Human Resources Department website details the process involved after someone has passed away.
After a cause of death certificate is obtained from a doctor, the deceased is then taken into care by the funeral company. Insurance policies, funeral plans, and wills then need to be considered, and Centrelink must also be informed when someone has died.
This is just the tip of the iceberg however. We recommend downloading a ‘who to notify checklist’ from the Human Resources Department website, so you know everything required.
The Cost of Dying in Australia
When a person dies, the resulting costs can vary significantly from person to person. The 2014 Grattan Institute study into death in Australia provides insightful information about the face of death in our country.
Australia has an ageing population. As baby boomers grow older, the number of Australians that die each year will double in the next 25 years.
Here are some more statistics to keep in mind:
- Half of Australians die in hospital
- One-third of Australians die in residential care
- 14% of Australians die at home
Despite these figures, 70% of Australians would prefer to die at home.
The cost of death varies considerably depending on how and where someone dies. The average cost of a person aged 50 and over being admitted to hospital and then dying in hospital in Australia is about $19,000, while deaths in residential care equate to half of this cost on average.
In total, $2.4 billion is spent on dying people in acute inpatient care each year, and care for people aged over 65 during their last years of life take up 5% of the total health budget.
Cost of a Working Age Parent Dying
One in five families in Australia are impacted by the death of a parent due to illness or a serious accident, according to the Lifewise/Natsem Underinsurance Report.
The impact of a parent’s death is more serious when the parent is of working age and the family is dependent on their income. The death of working aged parents in Australia is more common than you may think, with 18 Australian families losing a working age parent every day. When a working age parent dies, these families instantly lose half or more of their income.
Unfortunately, this report also shows that 95% of families are underinsured. As a result, the Federal Government is expected to pay $1.3 billion over the next 10 years due to underinsurance. That means it costs Australian taxpayers $131 million annually to provide for underinsured families after the death of a parent.
Daily Living Expenses
One of the first things that will likely suffer for your family if you were to die will be daily living expenses. According to most recent census data from the ABS, on average Australians are spending most of their budget on:
- Housing
- Transport
- Recreation
- Household furnishing
And this is just the start of all the living expenses to stay on top of – especially when you have a family to take care of as well.
Next Step Australia statistics show that education costs for school-aged children can range between $200 to $20,000 per year depending if the children attend a state school or private school.
Groceries will cost a family of 4 $220 on average, electricity bills cost $50 to $110 per month, and a telephone/broadband bill costs Australians between $90 and $140 per month depending on the package purchased.
These are all essential living expenses that need to be maintained, so it is important to consider how these areas of life would be affected if you died and your family had to cover these costs without you.
Outstanding Debt
One of the biggest dilemmas loved ones are likely to face after your death is covering any outstanding debts you may have after you pass away. To get a clear idea of much debt there is in our country, visit the Australian Debt Clock.
As of May 2016, the total private debt in Australia stands at $2.5 trillion. Digital Finance Statistics has also shown that average household debt had reached record heights at $245,000. With over 150,000 Australians dying in 2014, according to ABS statistics, and the majority of these people likely holding some form of debt, that’s a lot of outstanding money to be paid when these people pass away.
It is important to note that personal debts held by the deceased are only to be paid by another person if the debt of the particular asset is owned by someone else, if the debt is in joint names with another person or a third party has guaranteed the debt.
Mortgage Repayments
Australian household debt has tripled in the last 25 years, according to ABC. As of 2015, household debt averages 18 months of annual income. When a property owner dies, that mortgage will still need to be paid.
If the deceased person has a joint home loan, it is a heavy burden for the other person to take on those mortgage repayments solely, especially after losing the second source of income. According to Finder.com.au, if there is no co-borrower on the home loan, the mortgage payment must be made by the beneficiary.
Funeral Costs
One of the most immediate expenses you are likely to pay after death is funeral costs. ASIC’s Money Smart has looked into how much funerals cost in Australia, and it has been revealed that funerals cost between $4000 and $15,000. A number of costs are included in this price including the coffin, transport, funeral director fees and the death certificate, just to name a few.
It’s easy to prepare for funeral costs by taking out funeral insurance. At Cover Australia, all life insurance products we have available come with a funeral benefit included. Sufficient term life insurance can also cover these funeral expenses. Visit our Other Types of Life Insurance page to find out more.
Will Life Insurance Cover these Costs?
Life insurance providers have a thorough understanding of the costs a family is likely to incur when a person dies, and life insurance policies are made specifically to cover the most essential expenses when your family needs it most. Most life insurance policies will provide enough payment to cover costs including outstanding debts, mortgage repayments, daily living expenses and funeral costs.
When a policyholder dies, the life insurance will pay out a lump sum to the beneficiary. As long as the life insurance policy taken out is sufficient, the money should be enough to pay off the house and replace the income so that various household costs can be covered.
Life insurance will cover Australians who have died from a serious accident or medical condition. Please keep in mind however, a number of exclusions are present in typical life insurance policies and these can include:
- High-risk occupations
- Hazardous hobbies and pastimes
- Suicide
- Pre-existing medical conditions
- Failure to disclose information
- Death attributed to war or insurrection
There’s a range of life insurance policy types available, and each policy has its own process to cover costs associated with death. If you’d like to learn more about the different life insurance options available, contact us at Cover Australia for expert advice on how to cover costs associated with death.