> That said, funeral insurance is extremely common in SA, as even normal burials can be pretty expensive.
This is off-topic, but how does funeral insurance even work? You're guaranteed to die at some point, right? To me, insurance is there to hedge against something not very likely, but expensive. The odds are you're going to pay money in, and never see it back (if you don't get sick / crash your car / whatever).
Is funeral insurance just some form of forced savings?
Profitability comes from three prongs: many policies are canceled before a covered event, premiums are often collected for many years and have time to be invested before a covered event, and bundling with inappropriate investments.
For examples of inappropriate investments, you can look at whole life and variable annuities. Most people would be better off spending the same amount on term life + a stock index fund; assuming access to stock index funds, which is probably not a given in many African countries.
Indeed it is forced savings but with the benefit of covering your funeral expenditure if it is required suddenly and unexpectedly.
For context, it might cost you $5 per month, and give you funeral cover of $500.
As OP mentioned it is very common in South Africa, likely owed to the unpredictable life expectancy. All the large insurers offer it, it’s a massive market.
This is off-topic, but how does funeral insurance even work? You're guaranteed to die at some point, right? To me, insurance is there to hedge against something not very likely, but expensive. The odds are you're going to pay money in, and never see it back (if you don't get sick / crash your car / whatever).
Is funeral insurance just some form of forced savings?