For obvious reasons, life insurance is the preneed funding choice for many funeral directors. One hundred percent trusting laws give proactive preneed organizations no choice but to use insurance funding. Insurance provides the commissions needed to finance marketing and a sales force, and, maybe as important, relieves the funeral home from preneed accounting and administration. But insurance funding is predicated on the contract being performed at death. In contrast to funeral homes, cemeteries can (and must) deliver preneed sales in advance of death.
First, and foremost, the grave sale is typically ‘delivered’ as soon as the purchase price is paid. The cash flow generated from the grave sale is too crucial to a cemetery to defer until the purchaser’s death. Few (if any) state laws require the trusting of grave payments, and accordingly, grave sale payments flow directly into a cemetery’s operating account.
Marker and monument sales also generate crucial cash flow to the cemetery. Competition from monument dealers (and funeral homes) prompted cemeteries to offer markers through preneed sales. While it has been customary to defer marker deliveries until death, spiraling granite and bronze costs has forced cemeteries to accelerate deliveries of these sales. Applicable state laws generally require the trusting of preneed cemetery sales, and contemplate trust distributions prior to the consumer’s death.
In contrast to the funeral home, cemeteries do not need insurance for the funding of preneed programs. Cemeteries have an advantage in preneed marketing in that the grave sale has no trusting requirement, and states typically impose lower preneed trusting requirements on the cemetery industry. Where cemeteries feel the insurance void is in the administration required for the preneed sale. Small funeral homes often shun insurance funding in favor of the trust option offered by their state association. There are state cemetery associations that offer a master program, but they are the exception. Consequently, most cemeteries will find preneed to be an uphill climb without the assistance of insurance companies or a master association trust.