A recent news report titled “Broken Trust” served to fan the emotions of Illinois residents who purchased a preneed contract from the Illinois Funeral Directors Association. The facts involve a 103 year old lady who purchased the contract 16 years ago, and experienced a 32% drop in the contract’s value in one year. The news report quotes from the funeral home’s website:
“By locking in today’s funeral costs and ensuring that the necessary funds are set aside, you help relieve yourself of unnecessary future worry and your survivors of an unexpected expense.”
The news report then adds: “For the Graces and thousands of other families in Illinois, it did not work that way.”
The news report goes on to add commentary for consumer advocates advising against the purchase of preneed. However, the news report is very misleading and serves to confuse consumers because of an important fact: Mrs. Grace purchased a non-guaranteed contract.
Contrary to what the article suggests, the Grace family did not lock in the 1994 purchase prices of the funeral home’s goods and services. They have every right to be upset about the recent drop in value, but so do hundreds of Illinois funeral homes.
Over the course of 16 years, Mrs. Grace’s preneed contract has realized an increase of 1.66%. Not a great return. The goods and services selected in 1994 to have gone up at a rate of 4.2%.
While a difference of $4,500 may exist between the value of Mrs. Grace’s contract and the current cost of the 1994 goods and services, the Grace family is not obligated to purchase that same funeral. The family may choose less expensive goods and services.
The Illinois Comptroller has published various consumer guidelines regarding preneed contracts. All have an explanation of the differences of guaranteed and non-guaranteed.
To avoid unnecessary distress, consumers should read available disclosures closely, review the preneed contracts, ask questions of the funeral director, and involve other family members in the process.
For Illinois families who own a non-guaranteed preneed contract with diminished values, if you demonstrate flexibility over the casket selection, most funeral homes will reciprocate with regard to their services.