By Drake Smith, MSW,
Have you seen the ads on TV telling you to buy life insurance to help cover your $10,000 funeral! Talk about fear mongering; the average funeral costs way less. Cremation with a Celebration of Life can cost around $3,000! What about the ads on the radio telling you to get your affairs in order and achieve ‘peace of mind’ by talking to a ‘friendly counsellor’ in the funeral home? Hundreds, perhaps thousands, of Canadians see and hear these ads each year and march into their local funeral home, cheque book in hand. I’d like to tell you about the funeral pre-payment industry, how it works, and what you might wish to consider before you decide to write the cheque!
Pre-paying your funeral or cremation isn’t necessarily a bad idea, as long as you know what you’re doing. And most people don’t know what they’re signing when they pre-pay. Do you read every word on every contract you sign? I don’t. Why? Because the print is so tiny, it’s usually several pages long, you may not want to keep the salesperson waiting while you read it, and you’d have to have a Philadelphia lawyer there to translate the gobbledygook anyway. But remember, the fine print is there for a reason. And the companies who write these forms know exactly what they say and mean…they hired the Philadelphia lawyers to make sure of it!
A couple of examples might drive this point home. One lady told me that she pre-paid her funeral several years ago, and the funeral home set up a trust account for her money. It sounded good, but when she told the funeral home that she wanted to transfer her funeral arrangements to another funeral home in a different town, the first funeral home kept 20% of her money. And she got almost no interest on the money they’d held for over 20 years! They’d done very little work, but kept $600 of her $3000 policy, almost all the interest it produced, and it was completely legal for them to do so! I advise clients to avoid trust funds like the plague!
The other option is for the funeral home to send your money to an insurance company. But the insurance companies have great lawyers and their contracts have fine print too! One lady in the Kamloops area recently told me that she was paying $40 per month for 10 years for her cremation and memorial service. But her circumstances changed and she couldn’t afford to keep making the payments. So she cancelled her pre-payment plan. She’d contributed about $700 to the funeral insurance company.
How much do you think she got back when she cancelled? You guessed it…zip! Zilch! Why? Because the fine print said she wouldn’t get any refund if she cancelled. She told me that if she’d known she would lose all her money for cancelling, she wouldn’t have signed the contract!
So, why are funeral homes so eager to have you pre-pay? Pre-paying your funeral generates significant commissions for the funeral home or the insurance agent. It also literally or figuratively locks you in with the funeral home; if you pre-pay with Acme Funeral Home, you’re less likely to end up at a different funeral home when the time comes than if you don’t pre-pay.
Am I against pre-paying? No. Pre-paying your funeral may give you peace of mind; that’s for you to decide. It’s done so for many thousands of people over the years. And there are many wonderful funeral directors and insurance agents out there. But, as the old saying goes, “the devil is in the details” and the details are in the fine print. If you’re thinking of pre-paying your funeral, save this article and take it with you to the funeral home or when you meet with the insurance sales person/‘friendly counsellor’. Take a family member with you. Trust your gut when you meet the funeral director or agent. Take your time before signing anything. Read the fine print!
Drake Smith, MSW, is the Owner and Funeral Director of North Thompson Funeral & Drake Cremation Services. With locations in downtown Kamloops (phone 250-377-8225), Clearwater (phone 250-674-3030), and Barriere (MaryAnn Shewchuk, Manager, phone 250-672-1999), his dedicated team has served people in the Kamloops area and the entire North Thompson Valley since 2005.