For years, Illinois law has prohibited funeral homes from being named as beneficiaries to consumers’ life insurance policies.  In response to frauds committed by National Prearranged Services (NPS), many states amended their preneed laws to prohibit life insurance ownership by a funeral home.  NPS had structured its preneed program as owner of insurance policies sold to preneed consumers.   Then as owner, NPS borrowed and surrendered policies without consumer or funeral home knowledge.  Illinois took its restrictions further by barring the funeral home from being made beneficiary of a life insurance policy.

But the Illinois beneficiary prohibition has proved problematic for the consumer seeking to qualify for public assistance.  Typically, consumers will exclude life insurance surrender values from their assets by assigning the policy’s beneficial rights as consideration for a preneed contract.  The Illinois law precluded this and consumers resorted to third party trustees to qualify for public assistance.   That solution was cumbersome, and added costs to the consumer.

A bill was introduced in the Illinois Legislature this session to resolve this problem.  HB295 provides a structure for consumers to assign all or a portion of their life insurance to a funeral home in exchange for a guaranteed preneed contract.  The bill seems well thought through from both the consumer side and the funeral industry side.  However, we understand that cemetery representatives have voiced late opposition to the bill.    From a quick read of the bill, one could conclude the assignment is limited to funeral homes.  However, the bill clearly allows for assignments for cemetery merchandise and services.  To weigh the validity of their opposition, the cemetery representatives need to make their criticism public.