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10 Questions to Ask Before You Prepay Your Funeral

Image: A person preplanning their funeral Planning for your funeral may not be the most comfortable topic, but it is an essential part of ensuring that your wishes are met and relieving the burden on...

Funeral Prepayment Image: A person preplanning their funeral

Planning for your funeral may not be the most comfortable topic, but it is an essential part of ensuring that your wishes are met and relieving the burden on your loved ones. Prearranging and prepaying for your funeral can be a thoughtful and considerate gift for your family. However, navigating the process can be overwhelming, and you may have many questions. To help you get started, here are 10 important questions to ask a licensed funeral planning specialist.

1. How will my funeral funds be protected?

It's crucial to ensure that your funeral funds are secure. The law requires that your payments go to a third-party insurance company or trust account for safekeeping. Before committing to a prepaid funeral insurance policy or trust, research the safety, stability, and reputation of the company or account. Look for independent ratings, financial outlook, and longevity in the industry.

2. Can I prepay my funeral if I have health issues?

Having health issues does not necessarily exclude you from prepaying for your funeral. Funeral insurance policies and funeral trusts offer options that cater to different health circumstances. It is best to consult with your funeral provider to understand the plans you qualify for and how they align with your health situation.

Funeral Prepayment Image: A person discussing funeral prepayment options

3. Can I cancel my funeral insurance policy or trust?

Understanding the terms of cancellation is essential. Funeral insurance policies generally have an initial cancellation period, allowing you to receive a full refund within a specific timeframe. Revocable policies can be canceled at any time, while irrevocable policies serve other purposes, such as Medicaid qualification. Funeral trusts also have cancellation policies that vary by state. Before canceling any plan, consult your funeral provider or the customer service representative to make an informed decision.

4. Can the funeral home guarantee the prices in my contract?

Many funeral providers offer price guarantees on funeral goods, services, and merchandise included in your prepaid funeral plan. This means that the funeral home accepts the death benefit as payment for the items listed at the time of your passing. However, not all states or funeral homes provide this guarantee, and certain items may not be eligible. Ensure you understand the terms and conditions of the guarantee before finalizing your contract.

Funeral Prepayment Image: A person reviewing their funeral contract

5. How often will I receive updates from my account administrator?

Upon signing the prepaid funeral contract, you will receive a copy for your records. Additionally, when the administrating financial institution receives your funds, they will send you an acknowledgment letter. The frequency of correspondence varies between insurance companies and financial institutions. Some offer online portals or paper billing statements to help you keep track of your payments and account balance.

6. Can I include any expense in my funeral contract?

You have the flexibility to include any expense in your funeral contract. However, for Medicaid qualification purposes, only "normal and customary" funeral expenses are considered exempt assets. Additionally, certain items may involve third-party providers and may not be covered by the funeral home's price guarantee. These expenses are known as cash advance items and should be communicated with your family to avoid any surprises.

Funeral Prepayment Image: A person discussing funeral expenses with their loved ones

7. What happens to any leftover money in my prepaid funeral plan?

If there is any money left in your prepaid funeral plan, it will be given to your beneficiaries. During the pandemic, families faced challenges with restricted gatherings, leading to unfulfilled prepaid services. Many funeral directors have worked with families to schedule future events to utilize the remaining funds. Ensuring that the full funeral experience occurs, even if delayed, holds value for those mourning a loss, particularly during times of separation and social distancing.

8. Can I transfer my funeral contract if I move?

In most cases, transferring a funeral insurance policy or funeral trust to another funeral home should not be an issue. However, it's important to note that price guarantees or discounts from your original contract may not carry over. If you plan to transfer your contract, consult with the funeral home of your choice to review the terms and conditions.

Funeral Prepayment Image: A person discussing funeral contract transfer with a funeral director

9. What happens if my prepaid funeral plan is not fully paid at the time of my death?

The outcome depends on the type of plan you have. With a fully-insured policy, your family will typically receive the full death benefits, even if your plan was not fully paid. However, contestability rules apply to fully-insured plans within the first two years. Accidental death is usually covered by limited benefit insurance policies. If your policy has no insurance coverage, your next of kin will receive the current death benefit, and any remaining expenses must be covered by your family.

10. Can I make changes to my funeral contract?

If your funeral contract allows it, you can make changes to the goods and services you initially selected. However, changes to the final disposition (burial or cremation) are generally not permitted. To make changes to your funeral contract, discuss the options with your funeral provider. Note that changes to an irrevocable plan do not allow for withdrawal of funds.

As you navigate the process of prepaying your funeral, remember that the National Funeral Directors Association (NFDA) is an excellent resource. Visit their website for more information on the important components to consider when signing a prepaid funeral contract.