6 Myths—and the Truth—About Prepaid Funeral Plans

Search for “prepaid funeral plans” online, and you’ll likely get conflicting advice warning of scams and pitfalls. But prepaid funeral plans benefit families in many ways. Knowing your wishes will be honored after death and that survivors won’t be burdened with funeral costs can provide peace of mind. What’s more, many of the myths surrounding prepaid funeral plans are based on experiences people have had with providers who are not well-known or long established. Most prepaid funeral plan pitfalls can be avoided by working with a reputable and trusted provider.

In this article, you will learn the truth about these myths:

• Your money is better off in the bank.
• A funeral home can go out of business and you'll lose your investment.
• If you move, you will either have to return to the area where you purchased your prepaid funeral plan or lose your money.
• Life insurance covers funeral expenses.
• If you pass away before making all the installments on your prepaid funeral plan, it won't cover the costs.
• High-pressure sales tactics will lead you to buy things you don’t want or need.

Fact: It’s a mistaken belief that your money should be earning interest in a bank rather than being used for a prepaid funeral plan. Like most things, funeral costs have increased and will continue to do so. The National Funeral Directors Association shows that average funeral prices rose 97% from 1989 to 2017.

Prepaid funeral plans protect against inflation by locking in today’s prices on many items and services. That means that even if prices go up, your loved ones won’t have to pay more. For example, if you choose a casket that costs $3,000 today but when you pass and actually need that casket, the same item costs $5,000, your loved ones will not have to pay the additional $2,000.

Fact: While it’s true that a business can fold, when you purchase a plan through a trusted, reputable provider, you won’t be affected. State regulations require that prepaid funeral plan payments are securely invested with an independent entity—either an insurance provider or trust. That way, if the funeral home you make plans with goes out of business, the money in your plan can be transferred to another provider. Learn about what's included in cremation and funeral plans.

This funeral home and its staff provided us with excellent service. My parents had arranged pre-planning through this home, many years ago. Since then, the company that had underwritten the plan had gone out of business. In spite of this, the funeral home honored the pre-planning for arrangements for my mother's funeral, saving us a considerable amount. Additionally, the services provided us were excellent. The funeral directors took care of all arrangements, scheduling/arranging the visitation, taking care of notices, and coordinating with the church for the funeral and the cemetery. Through all of this, they were attentive to our needs and desires."

—Gerald L., St. Louis, MO

Fact: Reputable funeral homes allow prepaid funeral funds to be transferred to another provider if you relocate. When you plan final arrangements ahead of time with a Dignity Memorial® provider and move more than 75 miles from where you purchased the plan, your prearranged funeral and cemetery services are fully transferable and will be honored by any of the more than 1,900 Dignity Memorial locations in North America. If the funeral home you choose is not part of the Dignity Memorial network, the funds in your plan will still be available to your family, although they may not receive a price guarantee.

Fact: If you have a life insurance policy—and more than 40% of Americans don’t, according to a 2018 study by Foresters Financial—it’s not safe to assume it will cover funeral and other end-of-life expenses. Why?

Funeral expenses are due at the time of service, and life insurance policies typically don't pay out until weeks after death, which means that your family will need to pay the expenses up front. What's more: there's no guarantee that the life insurance payout amount will cover the cost of funeral expenses, and some life insurance policies have restrictions on how funds can be used. Learn about funeral and burial insurance options.

Fact: Most reputable providers offer funeral plans guaranteed to cover all of the prearranged services as long as your account is current. That means that as soon as your application is approved and you make the first payment, your arrangements are covered—even if you've made only a single payment (and as long as nothing was misrepresented at the time of purchase). This isn't true of all prepaid plans, however, so be sure you discuss your options thoroughly with your funeral planner.

Fact: When you meet with a Dignity Memorial planning professional, you'll learn about all of your options for planning a funeral, cremation and celebration of life. He or she will carefully listen to what's important to you and help you plan accordingly—without pressuring you into items that are unwanted or beyond your budget. Similarly, when the time comes for your family to honor your wishes, they will not be pressured into additional purchases. They can choose products or services that complement your wishes, but we won't try to talk them into choices you didn't make for yourself.

Our mother passed away recently. Both she and my father had prearranged funeral policies and a family plot for decades. Mac and George at Ridouts Valley Chapel helped us interpret their policy and provide our parents wishes. Our family has been in retail and sales for generations and I was prepared for a “hard sell” approach for us to upgrade this policy ... it never came! These professional gentlemen did mention options for our needs but fully explained the price increases that would occur if we altered the policy. For the caring we then received you would have thought we bought the “extravagant” package, which we did not.

—Alan P., Homewood, AL

We know making the decision to take care of final needs in advance is difficult, and many people don't know where to start. That's why we offer a free Personal Planning Guide. This guide allows you to record your final wishes and the details of your family heritage, military history, estate information and more into a single document to share with your family. Request your Personal Planning Guide now.