Funeral Services Preneed Funeral Planning 1 — Questions and Answers
Question 1: What federal rule requires funeral homes to provide itemized pricing information to consumers?
- The Sherman Antitrust Act
- The FTC Funeral Rule (Correct answer)
- The Consumer Protection Act
- The National Funeral Standards Act
Correct answer: The FTC Funeral Rule
The FTC Funeral Rule (16 CFR Part 453) requires funeral providers to give consumers itemized price information and a General Price List upon inquiry.
Question 2: A preneed funeral contract funded through a life insurance policy is best described as what type of arrangement?
- Irrevocable trust-funded preneed
- Pay-at-need contract
- Insurance-funded preneed (Correct answer)
- Mutual benefit agreement
Correct answer: Insurance-funded preneed
An insurance-funded preneed contract uses a life insurance policy assigned to the funeral home to fund the prearranged funeral services.
Question 3: In most U.S. states, what percentage of preneed funds collected must be placed into a trust?
- 50%
- 75%
- 90% to 100% (Correct answer)
- 25%
Correct answer: 90% to 100%
Most states require 90% to 100% of preneed funds to be deposited into a regulated trust to protect consumers.
Question 4: Which of the following best defines an 'irrevocable' preneed contract?
- A contract that can be cancelled at any time for a full refund
- A contract that cannot be cancelled or transferred without the beneficiary's death (Correct answer)
- A contract that automatically renews each year
- A contract funded by a bank certificate of deposit
Correct answer: A contract that cannot be cancelled or transferred without the beneficiary's death
An irrevocable preneed contract cannot be cancelled by the purchaser and is often required for Medicaid eligibility because the funds are not counted as assets.
Question 5: What is the primary purpose of preneed funeral planning from a consumer standpoint?
- To receive a discount on funeral merchandise
- To relieve survivors of decision-making burden and lock in current prices (Correct answer)
- To avoid paying sales tax on funeral goods
- To ensure the funeral home stays in business
Correct answer: To relieve survivors of decision-making burden and lock in current prices
Preneed planning allows individuals to make their own arrangements in advance, relieving family members of emotional decisions and potentially locking in current pricing.
Question 6: When a preneed contract purchaser moves to another state and wants to transfer their contract to a local funeral home, this is called a:
- Contract novation
- Portability transfer (Correct answer)
- Assignment of benefits
- Interstate relocation clause
Correct answer: Portability transfer
Portability refers to the ability to transfer a preneed contract to another funeral home, though transfer rules and fees vary by state and contract terms.
Question 7: Which government agency is primarily responsible for oversight of preneed funeral sales at the state level?
- The Federal Trade Commission
- The State Insurance Department or State Funeral Board (Correct answer)
- The Consumer Financial Protection Bureau
- The Social Security Administration
Correct answer: The State Insurance Department or State Funeral Board
Preneed funeral sales are regulated at the state level, typically overseen by the state funeral regulatory board, insurance department, or both.
Funeral Services Preneed Funeral Planning 1
What federal rule requires funeral homes to provide itemized pricing information to consumers?