Consumer NZ chief executive Jon Duffy said people taking out funeral insurance could end up paying twice as much in premiums than their policy was worth.
In the latest complaint to the organisation, an 85-year-old woman paid $18,900 for funeral insurance worth just $10,000.
Mr Duffy said the woman took out funeral insurance in 2003, paying for cover for herself and her adult son. The policy had a value of $5000 for each life insured.
"Over 17 years, she paid almost $9000 more in premiums than the policy would ever pay out in funeral costs," he said.
The insurer, Fidelity Life, declined to refund the additional premiums, stating the policy was working as "designed". The most the company would do was stop billing for further premiums and make the policy paid up.
Mr Duffy said Fidelity Life claimed funeral insurance was a "risk-based" product and customers wouldn't get a refund if the risk didn't occur or if the amount of a claim was less than the premiums paid.
However, funeral insurance isn't the same as other risk-based insurance, such as house or contents insurance, he said.
"Funeral insurance covers an event that's guaranteed to happen – your final send-off. Selling funeral policies that result in customers paying thousands more than the cover will ever be worth doesn't wash with us."
Mr Duffy said funeral insurance was heavily promoted, playing on people's fears about being a financial burden on their families. However, the lifetime costs of the product were seldom disclosed.
If customers couldn't afford to keep up premiums, there was typically no refund if they cancelled. Most policies only had a short cooling-off period after purchase when the customer could cancel and get their money back.
Mr Duffy said Consumer NZ was pushing for law changes to stop companies selling funeral insurance, and other insurance products, that provided poor value for customers and contained unfair terms.