Funeral insurance or a prepaid funeral?

Written by Henry Smith · Reviewed by Smiths Insurance & KiwiSaver, licensed Financial Advice Provider (FSP712931) · Updated 2026-10-20 · Reviewed quarterly, when the underlying data is restated.

Financial advice is provided by Craig Smith Business Services Limited, trading as Smiths Insurance & KiwiSaver, a licensed Financial Advice Provider (FSP712931). QuoteHub is a trading name.

Funeral insurance pays a set benefit after you die, while a prepaid funeral puts your own money into a plan or trust before you die. Momentum Life's Funeral Insurance pays $3,000 to $30,000, but total premiums can exceed the benefit, and the benefit may not cover a whole funeral. Prepaid trusts hold your money, with their own fees, withdrawal limits and provider risks.

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Funeral cover: Only accidental death is covered for the first 2 years. Total premiums can add up to more than the cover, and it may not meet the whole cost of a funeral.

Life cover: Conditions you already have aren't covered for the first 2 years (premiums refunded instead). Suicide isn't covered for the first 2 years, and a few conditions can be excluded permanently.

Insurer: Momentum Life Limited. Financial strength rating B (Fair) from AM Best, affirmed 11 February 2026; B ratings sit in AM Best's 'vulnerable' range. The rating scale is available for inspection at every Momentum Life office in New Zealand. What this means

Already have cover? Keep it. New cover won't pay for a condition you already have in its first 2 years.

Opens Momentum Life's online application; its guidance only covers eligibility. QuoteHub is a Momentum Life partner. Smiths Insurance & KiwiSaver may receive a commission if you buy. General information, not advice.

Funeral insurance is a policy: you pay premiums, and after a valid claim a fixed lump sum is paid to the owner or nominated beneficiary. A prepaid funeral, in the sense most New Zealanders mean, is a sum you hand to a trust or a funeral provider now so that it is available when you die. It is not insurance, and it is not designed to pay more than you put in. The main providers we found are Now For Them, run for the Funeral Directors Association of New Zealand (FDANZ), and the Public Trust Prepaid Funeral Trust. "Burial insurance", "preneed funeral insurance" and "burial policy" are search terms for both, so check which one you are being offered. Momentum's Funeral Insurance pays only for accidental death in the first 24 months. Any other death in that window pays no benefit and all premiums for that person are refunded.

How does a prepaid funeral work in NZ?

You pay money in, either as a lump sum or in instalments, and the trust holds it. When you die, it is used towards the funeral. The details differ by provider.

Now For Them (formerly The Funeral Trust) is run by The Funeral Trust Services Limited, a charitable company set up by The Charitable Funeral Trust (FDANZ). It says it is "not a savings or investment product, and no interest or return is paid", with "no fees" and a promise to tell customers if that changes. FDANZ restructured the old trust in 2025, with customers notified by November 2025 (FDANZ: What is Now For Them, FDANZ: Future changes). The older Funeral Trust FAQ says funds "may earn interest", which differs from the newer page, so check the current terms.
Public Trust Prepaid Funeral Trust has one set-up fee and one end fee (amounts not shown on the page) and no ongoing fees, with a discount if you also have a Public Trust Will and Enduring Powers of Attorney. Public Trust says the fund "is under a government guarantee", a statement we attribute to Public Trust and have not verified (Public Trust: Prepaid Funeral Trust).
Funeral directors may arrange a plan with you directly. Ask whether the money sits in a trust, who controls it and what happens to it if the business closes.

See our guides on how prepaid funerals work and Public Trust prepaid funerals.

How do funeral insurance, a prepaid trust and savings compare?

	Funeral insurance (Momentum wording)	Prepaid funeral trust	Savings account
What you get	A fixed sum, $3,000 to $30,000, or triple for an accident	The money you paid in, applied to the funeral under the trust's terms	Your own money
Early death	First 24 months: only accidental death pays; other deaths refund premiums	The money is there, as paid in so far	Only what has been saved so far
Long life	Premiums are level to the 89th birthday, then stop; the total can exceed the benefit	You pay only what you put in	You can stop saving
If you never use it	Nothing is returned after 24 months, and cancelling loses premiums paid	Leftover money may go to the estate; check terms	Stays yours
Interest or growth	None; it is insurance	Now For Them pays none; check others	Bank interest
Access before death	Cancel at any time on 30 days' notice; premiums paid are lost	Consumer NZ says you may not be able to withdraw "unless you're in significant financial hardship"	Normally yes
Funeral Grant	Work and Income's asset rules list life insurance proceeds among cash assets; ask how a funeral policy payout is treated	A prepaid funeral account counts as an asset; prepaid funeral cover can stop the grant	Savings count as assets
Provider risk	A licensed insurer, rated B (Fair) by A.M. Best	Depends on provider; Public Trust cites a government guarantee	Bank risk

Sources are the Momentum wording, the providers' pages, Work and Income and Consumer NZ (Momentum Life: Funeral Insurance Policy Wording, Consumer NZ: 5 ways to pay for your funeral, Work and Income: Funeral Grant). The "Funeral Grant" row is our reading of Work and Income's rules, not a ruling on your case; ask Work and Income if it matters to you.

Can premiums exceed the benefit with insurance?

Yes, and every funeral insurer's terms can produce it. Momentum's wording says total premiums "could exceed the Benefit" and the Benefit "may not cover the cost of a Life Insured's funeral". Consumer NZ looked at quotes for $10,000 of cover for a 64-year-old in 2024 and found you could pay "10% to 100% more than the policy was worth by age 84". The Insurance & Financial Services Ombudsman Scheme (IFSO) says insurers should warn about this "in the policy, on the website and in any advertising", and without a warning IFSO "is likely to uphold the complaint" (IFSO release, 11 December 2025). In an IFSO case about a $20,000 policy with premiums to age 90, the insurer refunded all premiums, and the case note says "It is not a savings product" (IFSO: Funeral insurance case).

That said, insurance does one thing a trust cannot. If you die early, a policy that has passed its window can pay far more than you have put in. Which risk is worse for you depends on your age, your health and your other money.

What are the risks of each option?

Insurance. The 24-month window, premiums that outrun the benefit, premiums that can change for everyone on the plan on 30 days' notice, and the underwriter's strength. Momentum's A.M. Best rating is B (Fair), in the range its own table calls "Vulnerable". The benefit is also capped at $30,000 and is not a promise to cover the whole funeral.
Prepaid trust. Fees, access limits and provider failure. We did not find a source describing what protects customers if a prepaid provider fails, so we do not claim a legal protection exists. Consumer NZ advises asking what happens if the funeral home closes. See what happens if a prepaid funeral provider fails.
Savings. The money can be spent on something else, and a short life leaves a shortfall.

How do the Funeral Grant and rest-home tests treat them?

The Work and Income Funeral Grant is up to $2,697.43 as at 1 April 2026 (page updated 24 June 2026). Work and Income says help such as prepaid funeral cover can stop you getting it, and its rules count a prepaid funeral account as an asset.

For the residential care subsidy, prepaid funeral expenses of up to $10,000 each, held in a recognised funeral plan, are not counted in the asset test. The single-person asset limit for people aged 65 and over is $300,811 (page updated 4 August 2026) (Work and Income: Residential care subsidy). The $10,000 exemption is a reason some older people choose a trust. We found nothing saying a funeral insurance policy is treated the same way, so ask Work and Income before assuming it is.

Which option suits fixed costs and which suits flexible ones?

A trust or savings puts a sum aside that your family can use for whatever the funeral turns out to cost, including the director's fee, the burial or cremation fees and anything else. Insurance also pays a sum, not a service. FDANZ's 2026 report gives an average of $11,700 for a cremation and $14,300 for a burial for a full funeral with 50 guests, and says 74% of deaths had no pre-arrangement or pre-payment (FDANZ: 2026 New Zealand Funeral Industry Trends Report). If you want to fix the services and the price with a particular director, ask that director what their plan includes, in writing. If you want an amount that is simply there for whānau to use, either route can do it.

How do you choose?

Decide the sum. Use the cost figures above and your own wishes.
Check your age and health. Momentum's Funeral Insurance accepts ages 40 to 75 with no health questions. Prepaid trusts have their own rules.
Check the early years. If you could die within 24 months, an illness death on a Momentum policy pays nothing.
Check access and fees. Can you get the money back? What are the fees?
Check the effect on the Funeral Grant and rest-home tests.
Price a plain savings plan. See funeral insurance vs saving for a funeral and is funeral insurance worth it.

Where to get advice

The buttons on this page open Momentum Life's online application, one option, not the only one. See funeral insurance quotes and what funeral insurance is. Momentum's A.M. Best rating is B (Fair); see its financial strength page. QuoteHub is a Momentum Life partner and Smiths Insurance & KiwiSaver may receive a commission if you buy a Momentum policy; see how we are paid. A licensed adviser can talk through the options on your details. Advice is provided by Craig Smith Business Services Limited, trading as Smiths Insurance & KiwiSaver, a licensed Financial Advice Provider (FSP712931). Back to the funeral insurance hub, or see Momentum Life's funeral cover.