Advantages of FE Over Preneed

[Justin Bilyj]

I am thinking of different ways FE would be a better choice (not always) for a person over a preneed policy.

FE pays full DB next day, next year as opposed to a preneed contract, this is assuming they have level first day coverage.

They can take their FE policy to any funeral home, mobility and independence.

A slight chance the Funeral Home could be bought out, go bankrupt by the time you need the policy (very remote).

Any others? THANKS!

 

[funeraldirector]

I am thinking of different ways FE would be a better choice (not always) for a person over a preneed policy.

FE pays full DB next day, next year as opposed to a preneed contract, this is assuming they have level first day coverage.

They can take their FE policy to any funeral home, mobility and independence.

A slight chance the Funeral Home could be bought out, go bankrupt by the time you need the policy (very remote).

Any others? THANKS!

I've sold a lot of both. Five years ago I stopped selling preneed because I believe that it is a stupid thing to do from a business standpoint. With a preneed the prices of the goods and services are "locked in." I work at a funeral home that has lots of preneeds from the late 80's that are now being serviced. We lose $2000 on every stinkin one of them. Preneed is all about share of market. Funeral home owners worry about this a lot. What other business locks in prices? Thinking...Commodities futures. Speculative investing. So when I sell a preneed, I'm selling death futures. In truth, a preneed owner dies on average in six years. If they live longer the funeral home loses more and more money every year. But it's all good for the insured and the salesman. I only sell FE LH.

As for pymt the day after the death occurred, it doesn't happen that way and I rarely take assignments. I was left holding the bag once on a 6000 funeral. My FH is the beneficiary on every LH I write.

In Calif if an FH went out of business, the files would be divided among the remaining funeral homes in the market so that the public is still served.

When a preneed insured dies, the family has no open to buy at the FH. With an FE the family usually has a big open to buy that allows them to arrange for bigger and better services. It is a business...

 

[Newby]

The only advantage FE has over Preneed is cheaper premiums (because they are usually for lifetime, and the policy does not grow).
But that's a big advantage. Many people can not afford to preplan.
Preneed policies pay full benefit 1st day IF the applicant can answer no on the health questions.
Any Preneed policy can be used at any funeral home. It doesn't matter which funeral home sold it.
Just appeal to the lower monthly premium crowd and you will sell a LOT of it.
When you try to sell to wealthier people, they will usually go with Preneed.

 

[Justin Bilyj]

The only advantage FE has over Preneed is cheaper premiums (because they are usually for lifetime, and the policy does not grow).
But that's a big advantage. Many people can not afford to preplan.
Preneed policies pay full benefit 1st day IF the applicant can answer no on the health questions.
Any Preneed policy can be used at any funeral home. It doesn't matter which funeral home sold it.
Just appeal to the lower monthly premium crowd and you will sell a LOT of it.
When you try to sell to wealthier people, they will usually go with Preneed.

Do you think a limited insurance pay like a 10 pay would be a better situation than a preneed policy?

 

[Newby]

Do you think a limited insurance pay like a 10 pay would be a better situation than a preneed policy?

People buy Preneed mainly for the price guarantee. They want the funeral bought and paid for and done.

FE would sometimes make more financial sense. Especially for those that die younger.

For instance, Friday I showed a lady two choices. A Preneed policy for a funeral that costs $12,600 and she can single pay it for $12,100.

Or a single pay FE where she pays $10,600 and has a $25,000 first day death benefit. The benefit on this one does not grow.

She is most likely going to choose the Preneed option. It happens all the time. And in the real long run, it probably is better. But if she dies anytime in the next 20 years or so, the FE option looks more appealing.
- - - - - - - - - - - - - - - - - -

Do you think a limited insurance pay like a 10 pay would be a better situation than a preneed policy?

The one bad thing that happens when selling limited pay FE policies is people will do the math to total the premiums up since there are a set amount of premiums. They will multiply the premium by 120 and sometimes balk at the total.

With lifetime pay it's less of a problem because they don't know exactly how long they will pay/live.

With Preneed it's different because the death benefit grows AND people usually pay them off early. They think of it more like financing a loan. When you buy a car you focus on the sales price, not what the total of the loan payments are (most people anyway)

Preneed is looked at in a similar way. And they double and triple up payments to pay them off quickly. Most of mine are paid off within two years (the same as cash period).