I have been an Insurance Agent for quite some time. When one becomes a Funeral Director, Insurance is one of those collateral duties that compliments your skill set and assists clients as they come to the funeral home looking for assistance for their future end of life (death) needs. Insurance offers a vast selection of products based on the needs of the client. The issues related to product selection are that although clients can vocalize their concerns, they often do not understand which product provides the most efficient solution for them. In most cases, their purchase decision will be based on one of two facts. The first one being the product presented to them at the point of purchase and the second one is generally based on the cost of goods.
In other words, the client is usually at the mercy of their insurance agent and their pocket book. Of course, we all must live within our means, so if our purse strings are small, so must be our expenses. It is incumbent upon one’s insurance agent to present an appropriate product that will cover the client’s needs at an affordable price. On the topic of end of life (death) expenses, this generally means that your insurance agent will present two options. A pre-funded funeral contract (Pre-Need Insurance) or a life insurance policy.
A pre-funded funeral contract or Pre-Need Insurance Policy is a policy that is purchased for the specific amount of your funeral expenses. It is a wonderful product for the consumer because it freezes the price of tomorrow’s funeral at today’s prices. If you have ever paid any attention to the cost of funerals, you will realize immediately what a bargain this product presents. During the last four decades, funeral expenses have risen 1328%. (Forbes Mag, April 2014)
A Pre-Need Insurance Policy is the premier method by which a consumer will receive monumental savings on their end of life (death) expenses. It is only one of three ways to save on death expenses, and it is usually the least utilized method by consumers. The average cost of a traditional American funeral is currently $8,000 – $16,000 depending on the area of the country in which you are located. If you are 24 years old, the price of your funeral is at the bottom end of the average ($8,000), and you die at age 64; following proven inflation rates for funeral expenses over the last four decades (1,328%), your funeral will cost $82,240.00 upon your death. If at age 24 you had purchased a Pre-Need Insurance Policy, upon your death, your funeral would cost the original price of $8,000.
Most 24-year-olds shopping for insurance purchase life insurance rather than pre-need insurance. The reason is that the cost appears to be substantially lower while the benefit appears to be substantially higher. Nothing could be farther from the truth. Shall we apply a term life policy and see how the finances work out? At age 24, a young male in good health may purchase a $250,000.00, 10-year term policy for as low as $14.00 per month. At 5 years the premium automatically jumps to $38.00 and the benefit drops to $100,000. At the end of the 10 years, the young male is now 34; he has paid $3,120 and has no insurance benefit. The funeral that he would have purchased for $8,000 is now priced at $20,560. At 34 years of age, he must now select a new insurance policy at higher rates and must cover higher funeral expenses that are continuing to rise.
The second method to cut your expenses by substantial proportions is to utilize an independently (family) owned and operated the funeral home. Independently (family) owned and operated funeral homes charge an average 42% less per funeral than do corporately owned funeral homes. (Forbes Mag, April 2014) If you live in an area where the average cost of a funeral is $8,000, you could possibly find funerals ranging from $10,680 at a corporate funeral home down to as low as $6,320 at an independent (family) owned funeral home. Shopping around could save you quite a bit of money on your expenses.
The third method is to select a funeral that contains fewer services. This method is by far the least effective way to save on end of life (death) expenses; however, it is the most commonly selected method by consumers suffering lower financial means. An example of a funeral containing fewer services would be a graveside service or an immediate burial.
Many readers might wonder why I have not listed cremation as a cost saver. The reason I have not listed cremation as a cost saver is that as we see a drop in the average annual number of burials within the US, the cost of cremation will begin to rise to balance the bottom line of the death care provider. In the not too distant future, consumers will see the cost of cremation rise to equal and even overtake the cost of burial. A business prices its products based on its costs to produce their goods to the consumer. Whether a consumer purchases a burial or a cremation, the death service provider retains certain costs within his bottom line that he cannot eliminate. Those costs are large expensive buildings, embalming rooms, fleet vehicles, insurance, taxes, employees, inventory, etc. By law and through regulation, the death care provider is required to have and maintain these items of business whether consumers use them or not. The expense of these items must be built into the businesses cost of goods and reflected in the price points. As the number of funerals sold at any given death care facility dwindles and the number of cremations rises, those expenses will begin to spread over and equalize into the cremation cost of goods column. When that equalization begins, the pricing of cremations will increase and the pricing of funerals may or may not lower.
My name is Tracy Renee Lee. I am the owner and Managing Funeral Director at Queen City Funeral Home in Queen City Texas. I am an author, syndicated columnist, and certified grief counselor. I write books and weekly bereavement articles related to understanding and coping with grief. I am the American Funeral Director of the Year Runner-Up and recipient of the BBB’s Integrity Award. I deliver powerful messages and motivate audiences toward positive recovery. It is my life’s work to comfort the bereaved and help them live on.
For additional encouragement, read other articles or watch video “Grief Briefs,” please go to my website at www.MourningCoffee.com.