Prepaid funeral plans are mostly offered by funeral homes. This refers to arrangements that you can make for your funeral in advance.
In most of the time, these arrangements involve paying for your gasket, type of services to have during the funeral and all the things one would prefer.
Funeral homes offer prepaid funeral plans for their customers. You are required to pay for all the services either directly or through installments. All the money is put in a trust fund in which the payout is triggered upon death.
Here are 10 Reasons to Avoid Prepaid Funeral Plans
1. They Lack Mobility Freedom
This is one of the reasons why prepaid plans is no not a good idea especially for senior citizens. Some times in life you may find yourself in the move. You may be changing your country of residence or state. This means that you are in a bit of bad luck if there is no such funeral home in your new location. Or, in some cases, your funeral home is location specific.
There are also some plans which come with a specific cemetery. This is even worse; it means that you will have to forget about the entire plan.
In cases where you are dealing with a funeral home that offers a chance to move your services, there are also issues attached. These include paying a penalty fee or administrative fee to make it possible other than further inconveniences in terms of planning.
2. Company Going Bankrupt or Money Embezzlement
When you decide to take such a prepaid funeral plan you are dealing with a company that is prone to bankruptcy and embezzlement of funds.
One of the major questions, in this case, is, “will there be money when I die?”
For prepaid funeral plan you are leaving everything on the hands of the funeral home or directors.
This means that you cannot control anything that happens within the company. At the same time once you die you do not have time and resources or even availability to follow up on your money. It means it is a total loss.
There have been very many cases of people losing their money in the same way.
3. Tying up Your Money as well as Funeral Home Benefits
Prepaid funeral plans are always all about tying your money with the funeral home and your benefit as well. This means that you will not be able to access these funds at any given time. It will be a really difficult experience to be able to benefit from all this investment until you die.
One thing that you should know is that funeral homes operate in a structure in which the funds are held. It is an institution that holds money.
For this reason, you will not be able to retrieve your money in any other way, neither will you be able to use it in any other way other than funeral services.
4. No Guarantees
Is this not the worst deal to make when you are paying a lot of money to a company and expect certain services when you die?
When you are enrolling for a prepaid funeral plan you are not given any guarantees that the company will provide the services stated in the deal. This means that you can invest a lot of your money for years in this plan and end up losing it all.
When you die, you have no guarantee that the company you are making a deal with will still be in business. For some reasons companies collapse or are closed. Another thing is that the rules of prepaid funeral plans do not apply to third parties.
5. Low Chances of Refunds
When you have decided a prepaid funeral plan it is important to know that you are dealing with a heavy investment. How would you feel investing thousands of dollars into a plan and you cannot get your money back in case you change your mind? This is mind-blowing.
Many funeral homes work on such basis. This is whereby, when you decide to cancel your plan you do not get a 100% refund on your money. You can imagine having invested more than $5,000 on a funeral plan then you get less than half the money in case you have changed your mind.
The best thing to do in this case, it is advisable to always dig enough to get information about the regulations of any funeral home. This will enable you to understand what percentage of the money they give back in case you have changed your mind.
6. States Protection Laws May Not Play Well for You
This is a factor that many people do not know about. The reason being very few people consider it to be a big deal and to many, it doesn’t even come in mind. What this means is that there are vast laws concerning the funeral industry. As a result, different states end up having different laws about the funeral industry.
This means, if you are not careful enough, you may end up getting into a plan whereby, you are vulnerable to exploitation and violation of your rights.
Some states are very straightforward when it comes to funeral services laws. There are some that ensure that all the prepayments made to a funeral home are available to the beneficiary in paying for the funeral.
In other states, they require the funeral home to provide a percentage of the money to hold as security to the policyholder. In other cases, there are funeral homes that do not have any clear guidelines on what should be done.
7. There is No Room for Changes
I guess this is the worst part of prepaid funeral homes. There are many things that can happen in life that can force you to change your policy. Sometimes you may change your mind and decide to make changes due to financial constraints or anything else.
As a result of such things, it means that once you decide to make a change and there is no room, you will be forced to work on that plan or cancel it.
Other than making changes in terms of the cost of the policy, you may decide to make changes in terms of the services you want.
A good example is opting for a cheaper coffin or fewer follower arrangements.
8. You are Making the Funeral Home the Beneficiary
This one might sound funny but it is the reality. When you are taking a prepaid funeral plan you are choosing a funeral home to be your beneficiary. However, when you take a buy life insurance you are making your family your beneficiary. The question is, does it really sound beneficial?
The reality is, once you have taken the policy, the funeral home and directors decide what will happen. This is because they are the ones to offer the services required.
Once you are dead it is impossible to monitor every step taken by the funeral home based on the agreement you had when you were alive.
At the same time, in many cases, directors and funeral homes can edit or change the type of services you are receiving to help them scope all the money that you are benefiting from. There is nothing really you can do about it.
9. Need for a Lawyer to Understand the Contract
The reality is that; funeral plans contracts are not simple. They are usually more complicated than you might think. These are contracts that require a lot of understanding to be able to fully benefit from what is being offered.
It is advisable to use a lawyer who can help you understand the contracts and their terms. Since all these contracts will come with their own conditions, a lawyer, in this case, is very important.
You will be able to understand where there are regulations and where fines apply.
However, the question is “Who wants to hire an attorney for just a prepaid funeral plan?”
10. Poor Reputation of Funeral Directors
This is entirely not a new thing. Time and time again people have suffered on the hands of funeral directors. Hence, the popular phrase that funeral directors say pre-plan, don’t pre-pay.
The disadvantages of this are many. It means that you are not sure about a lot of things. It means that there are so many chances that there will not be good plans laid down to execute your interests as per the plan.
At the same time there change in prices. Appreciation and depreciation is a factor that you cannot control. Change of other policies such as government policies that affect your policy provides are inevitable.
Alternative options to Prepaid Funeral Plans
For senior citizens(age between 85 to 95), it is not really advisable to strain yourself with prepaid funeral plans. The best option to go for burial insurance. These are plans that come with many benefits, especially for the seniors.
One of them is that you will spend less, hence avoiding so many financial strains through the last days of your life.
Another thing is that you will have a guarantee for your money and get all the benefits you wanted without any losses.
Burial insurance is also easy to take since there are few regulations and procedures that are not clear.
Here is More of What You Need to Know About a Burial Insurance
It is a type of funeral insurance that is designed to take care of all the cost that is associated with your funeral expenses or cremation costs once you die.
One of the major reason why this is better because funeral homes end up costing way more than average. As a result, when you take any other plan such as prepaid funeral plan you end up spending way more than you could have. Basically, it is exploitation.
One thing to note here is that burial insurance policies mostly vary from one insurance company to the other. As a result, it is important to take time and research as much as possible about different companies and what they have on their policies. There are policies that have better pay while others are less.
The way burial insurance work is that you enroll in a plan whereby you can pay in installment or at once. The entire policy has clear indicators of what will be your benefits upon the expiry of the policy.
Once you die, your beneficiaries will directly receive the money as per the policy without a question of how they will use it.
For example, you may have a burial insurance policy that is giving you $20,000 and funeral expenses that add up to $30,000. The best part about this plan is that your beneficiaries have the liberty to use the money they get in whichever way they please.
Some of these expenses include legal costs, medical bills or outstanding debts. Lastly, you can make your own funeral plan.
Factors to Consider When Choosing the Burial Insurance Company
Here are some few factors you should consider when you want to find the best burial insurance company.
Different companies come with different policies for their services. When you want to go for a company it is important to make sure that they have policies that will work on your side depending on the benefits you are looking for.
A good company that offers good services will be known for its reputation. Research and understand what reputation a company holds before you get into a deal. Also, look at the customer feedbacks which are really important.
Size or Strength of the Company
When it comes to matters with insurance you have to make sure that the company will not go bankrupt in the next year. You have to go to a company that is doing well to be secure in terms of how much they are able to pay for your benefits. This will give you some guarantee.