Burial society vs funeral insurance

We weigh the pros and cons of belonging to a burial scheme or having funeral cover

South African communities have been coming together to form stokvels in order to offer financial and emotional support to one another in times of need. Learn more about the legalities of these schemes.

Lizl Finch - National Head of Sales

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23 March 2021 | 3 minute read

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What is a burial society?

A burial society is a mutual assistance scheme where members share risk by pooling their finances, each contributing an agreed-upon monthly amount. Essentially it is an informal funeral scheme which also serves an added benefit of offering assistance during the planning of a funeral. There are approximately 100 000 burial societies across South Africa.

How does it work - joining requirements?

When you find a society you would like to join, you fill out an application form, choose your cover and pay a registration fee. Once you are signed up, your monthly payments go into a collective fund. If you fail to make your payments, in some cases, for less than three months, your membership is automatically revoked.

Why people choose to belong to a burial society - Advantages

Burial societies are embedded in African culture and custom and there is a significant cultural importance to having a proper funeral, which can be a very expensive event. It isn’t just the financial support that is very appealing but also the emotional support extended to the grieving family by all burial society members. Burial societies are also often able to offer faster pay-outs and less formal documentation is required when going about this process. Also, people in rural areas often do not have access to the resources needed to apply for funeral cover.

Why people choose to belong to a burial society - Disadvantages

Burial societies are unregulated, which means that members are not guaranteed a pay-out because there is no contract to enforce or back-up their contributions and members are not protected legally. There can be poor administration, theft and loss of money, as there is often no accountability.

Why funeral cover is better than a burial society

Financial institution’s funeral plans are governed by statutory and regulatory bodies which protect the consumer, govern their products soundness and ensure the financial obligations are being met. Under these plans, you are also protected by:

Consumer Protection Act

This Act covers all consumers (subject to certain exclusions) where the person has a turnover or asset value of less than R100 000. As burial societies are unregulated, they cannot be held accountable by the Act.

Long Term Insurance Act

This Act provides provisions for funeral cover specifically. The long-term insurance Ombud (who also deal with short term disputes) helps settle disputes between the policyholder and the long-term insurer. Some burial societies pay premiums for contractual arrangements with insurers but collection of premiums may not be regulated by burial society policyholders which is where the risk arises, opening the door for mismanagement and fraud.

Financial Advisory and Intermediary Services Act

Impacts on the financial services industry and aims to regulate the giving of advice and rendering of intermediary services to clients, as well as certain other issues.