Sonya Sellmeyer

By Sonya Sellmeyer, Consumer Advocacy Officer for the Iowa Insurance Division

The process of planning a funeral is unfamiliar territory for most people. Preneed or prearrangement funeral plans can fund and assist with planning a funeral, thus removing the burden from your loved ones.  

Things to know about prearranged funeral plans:

  • The terms and conditions of your preneed funeral plan are in your purchase agreement; read it carefully before you sign it and get a copy.
     
  • Make sure the agreement shows the price of the services and merchandise selected. There may be prices in the agreement that are not guaranteed and will change at the time of the actual service.  For example, the price of the casket may be guaranteed while the price of items such as flowers, musicians, or vocalists may not be. 
     
  • Funeral homes may not own facilities for a final resting place.  You may need to contact a cemetery or mausoleum to make those arrangements. 
     
  • Special rules may apply if you are buying a funeral plan for a person on Medicaid. Call the Iowa Department of Human Services at 515-281-8621 for information.

How Payment Works:

  • Money to pay for a preneed plan generally must go into a trust account or an insurance policy to ensure that it is available to fund your funeral years later.
     
  • Understand where your money will be kept, what type of interest will be earned, and who pays the income taxes. The potential to earn interest on this money may determine if a non-guaranteed or guaranteed plan is best for you and your family. For example, if you buy a non guaranteed purchase agreement 20 years before you die, the interest rate on a bank certificate of deposit may generate a need for your family to contribute to your funeral.
     
  • If you purchase an insurance policy to fund the preneed agreement, make your check payable to the insurance company and get a receipt. If your purchase is being deposited into a bank account, ask to see the account statement.
     
  • If you opt for an installment payment plan, ask what would happen if you stop making payments and the refund policy. 

Know Your Rights:

  • You have the right to cancel your purchase agreement within three business days, and receive a complete refund.
     
  • You may have the right to transfer the amount paid to a preneed plan for an agreement with a different preneed seller but, beware, most contracts will assess a cancellation charge as a result.
     
  • Before making a final decision on a preneed plan, get a written itemized price list from several different funeral homes. 

Remember:

  • Any payments should be made out to the financial institution where your money will be held or to the insurance company issuing your policy, not a funeral home or funeral director.
     
  • Keep your purchase agreement with your important papers and tell a family member or trusted advisor about the preneed plan.
     
  • If you or a loved one has a question or complaint about a prearranged funeral plan contact the Iowa Insurance Division at iid.iowa.gov or toll-free at 877-955-1212.