Funeral insurance or saving for a funeral in NZ: which fits?

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.

Saving for a funeral avoids premiums and the chance of paying in more than a policy returns, but the balance may fall short if you die before it grows. Funeral insurance pays a fixed benefit, though in the first 24 months Momentum Life's Funeral Insurance pays only for accidental death, and total premiums can end up larger than the benefit.

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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 contract that pays a lump sum when the insured person dies, in return for regular premiums. Saving for a funeral means putting money aside yourself, in a bank account or a prepaid plan. The two differ in who carries the risk of an early death. With savings, you carry it: the pot is only as big as you have built so far. With insurance, the insurer carries part of it, but not in the first 24 months of a Momentum policy, when a death from illness pays nothing and premiums are refunded. Over a long life, insurance can cost more than the saving it replaces, because you are paying for that transfer of risk. Neither option is better for everyone. The right one depends on your age, how much you can put aside each month, and how much of the risk you can carry yourself.

The three ways to prepare, side by side

	Save it yourself	Prepay a funeral plan	Funeral insurance
How it works	You build a balance in an account you control	You pay a provider (a funeral trust or a funeral director) to hold money for a funeral	You pay premiums for a fixed benefit on death
If you die early	The family has only what you have saved so far	The family has what you have paid in	The full benefit only after the early-death window (Momentum: 24 months, accident only before that)
If you live long	The balance is yours, and the leftover goes to the estate	The balance is held for the funeral; check what happens to any excess	Premiums may total more than the benefit
Can you get your money back?	Yes, any time	Depends on the plan; check the terms	Only inside the 30-day free look, or the premium refund for a non-accident death in the first 24 months
Health or age limits	None	Plan terms vary	Momentum's Funeral Insurance accepts New Zealanders aged 40 to 75 with no health questions

Prepaid plans have their own page: see funeral insurance versus a prepaid funeral.

How long does it take to save for a funeral?

The target matters first. The Funeral Directors Association of New Zealand (FDANZ) 2026 report, based on a 2025 survey of member homes, gives an average of $11,700 for a cremation funeral with 50 attendees at a funeral home (range $10,000 to $13,900), $14,300 for the same funeral with a burial, and $4,700 for an unattended cremation with no service (FDANZ 2026 Industry Trends Report). Your own figure will differ. Our funeral costs hub breaks down the parts.

The table shows how many years a steady monthly saving takes to reach each target. The first figure assumes no interest. The second assumes 4% a year paid monthly, which is an illustrative round number for the method, not a rate any bank has quoted. Check what your own account pays.

Saved each month	To reach $4,700 (no interest / 4%)	To reach $11,700 (no interest / 4%)
$50	7.8 / 6.8 years	19.5 / 14.4 years
$100	3.9 / 3.6 years	9.8 / 8.2 years
$200	2.0 / 1.9 years	4.9 / 4.5 years

At $100 a month, the balance after the first 24 months is $2,400 with no interest. That is the number to hold against the insurance window below.

The early-death gap: saving versus the first 24 months of cover

Both routes leave a gap at the start. A new saver has a small balance. A new Momentum Funeral Insurance policyholder has limited cover.

Under the policy wording, for the first 24 months Momentum pays the benefit only if death is the direct result of an accident and happens within 90 days of it. In that case it pays three times the benefit, as it does for an accident at any later time. Any other death in that period pays no benefit, and all premiums paid for that person are refunded. After 24 months it pays for death from any cause (Momentum Life: Funeral Insurance Policy Wording, 17 August 2023). The window restarts for any increase in the benefit or any added person. Our page on funeral insurance waiting periods walks through it.

So in the first two years, the person who saved has whatever they have put aside, and the person who insured has the accident payout, or a refund of premiums, but no funeral money for a death from illness. If you can answer health questions, fully underwritten life cover through a licensed adviser is a different product with its own terms and is worth comparing.

When do total premiums pass the benefit?

Momentum publishes no funeral premium, so we do not print one. Use this method with the figure from your own quote. Divide the benefit by the monthly premium: that is the number of months after which everything you have paid equals what the policy would pay.

The table uses round, made-up premiums on a $10,000 benefit to show the shape. They are not Momentum prices.

Example monthly premium	Months until premiums equal $10,000	Years
$30	333	27.8
$60	167	13.9
$100	100	8.3

Momentum's premiums are fixed each year until the 89th birthday, then stop, but can be changed for everyone on the plan on 30 days' written notice if tax law changes or claims experience is significantly different from expected. Someone who joins at 65 can pay for at most 24 years. The wording itself warns that "the total premiums you pay to us could exceed the Benefit we pay to you" and that the benefit "may not cover the cost of a Life Insured's funeral". It is not a savings or investment plan. If you die after the break-even point, you have paid in more than the family receives; if before, less. No table here predicts when that will be. Run your own numbers in the break-even calculator.

What happens to a bank account when someone dies?

Savings are only useful if the family can reach them when needed.

Joint account. A joint bank account passes to the other owner immediately and in full, and is not part of the estate (Community Law).
Account in one name. Banks are among the organisations to tell after a death. Govt.nz says the bank can release money from the deceased's account to pay for the funeral, and the person arranging it does not need to be the executor or wait for probate (Govt.nz: What to do when someone dies). Release is up to the bank.
Small sums without probate. Under section 65 of the Administration Act 1969, banks and certain other payers may pay sums up to $40,000 (from 24 September 2025) to listed relatives or beneficiaries without a grant of administration. They may, not must (Administration Act 1969; Public Trust).

So savings in a single name are not always instantly available, though the bank can release funds for the funeral. Funeral insurance is paid to the policy owner, or to the nominated beneficiary if the owner has died; a beneficiary must be a natural person. Momentum cannot pay a funeral director directly.

Prepaid funeral plans as a third route

A prepaid plan is a middle path. Now For Them, a prepaid scheme run by a charitable company set up by the Funeral Directors Association of New Zealand's Charitable Funeral Trust, says it is "not a savings or investment product, and no interest or return is paid". The first $10,000 is excluded from residential care asset testing under current Ministry of Social Development policy (FDANZ: Now For Them). A prepaid funeral account counts as an asset for the Funeral Grant (Work and Income). Terms differ between providers and change, so read the current ones.

Which option fits? A decision path

Can you build the target soon? If you can save the cost within a few years and you are in good health, saving or a prepaid plan leaves nothing paid for risk.
Do you have little time or little to put aside? If you are in your late 60s or 70s and cannot reach the target quickly, a policy may fill part of the gap. Check the first 24 months, and note that Momentum's Funeral Insurance does not accept new applicants over 75.
Do you want the family to have money quickly without reliance on a bank? Insurance pays the owner or the beneficiary; Momentum says it usually pays within 24 to 48 hours of claim approval.
Would the funeral grant matter? The Work and Income Funeral Grant is means-tested, up to $2,697.43 as at 1 April 2026, and cash assets, including life insurance proceeds and a prepaid funeral account, can count (Work and Income: Funeral Grant). See the funeral grant guide.
Could a mix work? A modest benefit plus regular saving can cover the early window and reduce the premium you pay.

None of this is personal advice. Our page on whether funeral insurance is worth it and the cost guide go further.

Where to get advice

Compared: saving, prepaid plans and Momentum Life's Funeral Insurance, on the points above, as at 20 October 2026, from the documents cited. Not every product is included. This is one adviser's reading, not a score. Momentum Life Limited has a financial strength rating of B (Fair) from A.M. Best, affirmed 11 February 2026; B sits in A.M. Best's "vulnerable" range on Momentum's own table, and the rating is not a recommendation (see Momentum's financial strength page). The buttons on this page open Momentum Life's online application. 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. Complaints about a Momentum policy go to Momentum first, then the Insurance & Financial Services Ombudsman (IFSO). 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 the Momentum Funeral Cover page.