For those interested in prearranged and preplanned funerals, there are three general types of preplanning that can help families make more informed decisions in funeral planning. The information below applies to all types of services, funerals, burials, memorial services or cremations.
The three types which we consider the most important to understand are:
PREARRANGED FUNERALS: A funeral that is prearranged usually does not involve the transfer of any funds from the consumer to an insurance company, a bank, the mortuary, or any other type of funeral service funding provider. It does involve the arrangement of the details of a funeral service. This can be done on a very limited basis, planning only a few of the most general parts of the funeral arrangements, or can be very detailed, covering every aspect of the funeral.
The meetings about arrangements are usually held with the mortuary, the individual doing the planning, and the family of the individual. Often copies of these arrangements are also held by close friends or a minister. They are flexible, and if the consumer decides to make changes as time passes, these records are updated. There is no obligation by the consumer to use any particular casket or other funeral merchandise, cemetary, or even funeral home, although these choices are often specified.
We feel that this aspect of funeral planning is often more substantial than the financial aspect, because it allows them to discuss their wishes with family members. This can help avoid confusion and conflict at the time of death. It is also significant to consider the fact that certain parts of the funeral planning process are also part of the grief process, and will be important for members of the family to participate in at the time of death.
PREPAID FUNERAL PLANS: The second two types of funeral planning fall under prepaid funeral plans. They include the following:
INSURANCE FUNDED PLANS: The funeral that is insurance funded usually carries a guarantee that if the consumer dies before all contracted payments are made, the specified costs of the funeral will be covered. If inflation had caused funeral prices to rise, the plan may or may not cover this increase in price.
There are two important considerations to be aware of here: first, some insurance contracts have a waiting period where, even though the consumer has made all payments as required, they will only receive the balance “paid in” plus some accrued interest, or a limited percentage of the full benefit. This usually applies if the insured dies in the early years of the contract. It is always specified in the contract, but is not always clearly understood by the consumer or their families. It usually accompanies insurance policies which have little or no medical requirements and is sometimes referred to as a guaranteed issue plan.
The second consideration to be aware of is that you will be paying a premium for the protection that the insurance provides. If you live longer than the number of years you are making payments, you almost always pay in more, sometimes much more, than the funeral actually cost at the time you took out the policy. It is also important to determine whether a guarantee exists that the policy will cover funeral costs at the time of death.
NON-INSURANCE FUNDED PLANS: This type of funding is often done through a trust, annuity, or bank account. It involves placing the funds for a funeral with the funeral home or other financial agent for the purpose of paying funeral expenses.
There are a wide variety of plans available from many sources, but it is important to get at least one of two items with them: a good rate of interest on the investment so that the funds on deposit will keep up with inflation of funeral costs, or a guarantee that once the funds are deposited, the funeral cost will be frozen at a specific price.
The important difference between this method and the insurance funded method is that the consumer will usually pay in exactly what the funeral costs at today’s price with no premium. This method does require, however, that the balance of the contract be paid if the individual dies prior to paying the contract price.
There has been a very large increase in the number of individuals who are pre-planning their funerals. It is only fair to say that much of the emphasis on prepaying comes from individuals and companies who stand to benefit from people investing money with them. Like any investment, there are plans being offered which are good for the consumer, and some that are not. We feel that the importance of prepaying a funeral varies greatly from one individual to another and should be considered on that basis.
As we stated earlier, we feel that the greatest emphasis should be placed on making some of the decisions about the funeral itself, discussing the options with family members, and being aware of the expenses involved.
We want to make sure that everyone is comfortable with and aware of the options that work best for them. If you decide to meet with us to discuss funeral planning, it will be by your choice and you will meet with one of our counselors. Our goal will be to answer your questions, explain all of your options, and help you decide what best meets your needs.