Burial society vs funeral insurance: Which is best

Did you know there are more than 100 000 burial societies in South Africa? Burial societies were initially formed to assist families by providing cover for the funerals of loved ones.

City Press reader Sakhele Faku from Khayelitsha belongs to a burial society and pays about R200 a month to cover the 10 people he is responsible for. However, Faku says the payouts from the burial society are not enough to cover the cost of a funeral

How do burial societies work?

When you find a society you would like to join, you pay a joining/registration fee, then your monthly payments go into a collective fund.

David Neves, senior researcher at the Institute for Poverty, Land and Agrarian Studies, believes that burial societies have stood the test of time because, although they are largely unregulated, they have historically remained more cost-effective than formal providers.

However, because the societies are largely unregulated, they are susceptible to fraud and mismanagement, and there may be insufficient funds to pay for a funeral.

Problems experienced by burial societies include members not paying their contributions, running out of money, poor administration, theft and moey lost by committee members.

Most societies elect a chairperson, secretary and treasurer (executive committee) every year to manage the funds of the society. The idea is that, with more than one person in charge, mismanagement can be avoided. Even though burial societies are not normally registered with any legal or formal regulatory body, they still have to operate under common law. The societies do not intend to make a profit and therefore fall under the law of a voluntary association, which deals with nonprofit organisations.

Funeral insurance may be better

Capitec’s Brent Moore points out that burial societies are often informal and unregulated, and, if mismanaged, can result in a society not being able to meet its financial obligations to its members.

“Funeral insurance plans are governed by statutory and regulatory bodies that govern the financial soundness of a product offering and conduct of service providers,” says Moore.

“These regulatory mechanisms frame what we are allowed to create in a product proposition to meet our client’s needs, and also how well we execute against our promises to clients.

“In this way, both service providers and clients are aligned and protected, and formal recourse protection mechanisms are available via the independent third-party governing bodies.

•  This series is reported by City Press and paid for by Capitec