Prepaid Funeral Contract

1. Should I consider a prepaid funeral contract?
 
2. Where does my money go?
 
3. What if I change my mind and want my money back?
 
4. What if I want to change funeral homes?
 
5. If death occurs before the prepaid contract is paid in full, will any additional payments be required?
 
6. Will my contract cover all my final expenses?
 
7. What happens if a funeral home which sold trust-funded prepaid funeral benefit contracts goes out of business or misappropriates prepaid funds?
 

Question #1Should I consider a prepaid funeral contract?
Answer:Prepaid funeral contracts are governed by Chapter 154 of the Texas Finance Code and are under the jurisdiction of the Texas Department of Banking. Such contracts are being marketed extensively and offer the opportunity to permit a person to fully consider his or her needs and wishes and control the cost and nature of funeral services desired. The contracts vary in terms and coverages and should, like any other purchase involving a substantial sum of money, be reviewed carefully before execution. Texas law requires that any seller of contracts for prepaid funeral arrangements must first apply and obtain a permit from the Texas Department of Banking. Do not contract with any seller who does not have such a permit, and make certain the proposed contract meets minimum Texas legal requirements, including that a trust fund has been created for the proceeds from prepaid contracts through a contract of insurance with an insurance company licensed in Texas, or that such a trust fund is established in a bank or savings and loan association operated under the provisions of the Texas Trust Act.

Question #2Where does my money go?
Answer:A deposit fund is established with a financial institution approved by the Texas Department of Banking, or a fund is created by a life insurance or annuity contract with an insurance company authorized to do business with the State of Texas. If a life insurance or annuity contract is used, the person who sells you the policy and the insurance company must be licensed by the Texas Department of Insurance. Ask to see his/her license. In addition, you are entitled to receive a copy of the policy and should be sure that you understand the benefits, limitations and exclusions. You can call the Texas Department of Insurance at 1-800-252-3439 or 512-463-6501 for license information on both agents and companies or for assistance in interpreting policy language.

Question #3What if I change my mind and want my money back?
Answer:In a deposit fund arrangement, the purchaser can cancel the contract prior to maturity and receive a refund in accordance with the terms of the contract. If you have a life insurance or annuity arrangement, you may receive only the cash surrender value, if any, as indicated in the insurance policy or annuity and the prepaid contract. Read and understand the cancellation language in the policy or annuity and in the prepaid contract.

Question #4What if I want to change funeral homes?
Answer:If the prepaid funeral contract is in a deposit fund you may have to cancel your contract and make other arrangements. If the prepaid contract is funded by a policy of insurance you may be able to cancel the contract and keep the insurance policy allowing you to choose another funeral establishment. Talk to the seller of your prepaid contract and the funeral director of the funeral home you wish to use. Make sure all parties are in agreement and be sure to get a copy of any such agreement in writing.

Question #5If death occurs before the prepaid contract is paid in full, will any additional payments be required?
Answer:On a deposit arrangement any unpaid balance would become due at the time of the funeral. Depending on the type of insurance policy or annuity contract used to fund the prepaid funeral contract, expenses may not be paid in full. If you are unsure, question the seller and/or the Texas Department of Banking or the Texas Department of Insurance.

Question #6Will my contract cover all my final expenses?
Answer:You are entitled to receive all items shown on the contract at no additional charge, if the terms of the contract have been met. There may be an additional charge for items that are not part of the prepaid contract. These may include cemetery fees, such as lowering equipment and the opening and closing of the grave. You should discuss with the seller items that are not covered.

Question #7What happens if a funeral home which sold trust-funded prepaid funeral benefit contracts goes out of business or misappropriates prepaid funds?
Answer:It would depend on whether the funeral home was a licensed seller. If the funeral home held a valid permit when the prepaid funeral contracts were sold, the Department of Banking would take over the contracts and find a subsequent provider. Any shortages to the fund would be covered by the Prepaid Funeral Guaranty Fund. The purchaser would not suffer a financial loss. However, if the funeral home was an unlicensed seller, the Department of Banking will take actions in coordination with the local District Attorney to try to recover the prepaid funds through restitution. The purchaser can suffer a financial loss in the situation because the Prepaid Funeral Guaranty Fund can not be used.

Wade Family Funeral Home • 4140 West Pioneer Parkway • Arlington, TX 76013 • (817) 274-9233