Encore: Is "Pre-Need" Really Needed?

Some readers have asked me to republish (and update) some of my more popular older posts. This article, first published in July, 2008, deals with planning for death (our own or a loved one's). Not something we usually like to think about, but a reality of our time on Earth.

There is a product that is growing in popularity among seniors and is being merchandised aggressively by funeral parlors. This product is known euphemistically as “Pre-Need.” It is sold by funeral directors, of which there are very many. Retirement communities breed undertakers and cemeteries in the same way that young family suburbs grow childcare centers and elementary schools.

Morticians have discovered an undeniable truth about merchandising their wares. It is very difficult to return a cemetery plot or coffin, especially after it has been used. This gives the death business an advantage that has to be the envy of merchants selling more mundane wares.

So what, exactly, is Pre-Need? The idea, which is attractive to many retirees, is that they can make decisions concerning their deaths while still alive and vigorous. Purchasers of Pre-Need packages hope that all will go smoothly when they die, and that they will be sparing their loved ones the turmoil and trauma of having to make all sorts of tough choices under time and emotional pressures.

By arranging all of these things, and paying for them in advance, the theory goes, the temptation to buy the most expensive casket and services (because nothing is too good for “Dad”) can be avoided.

The cynical view is that Pre-Need is a clever scheme that greedy funeral parlor owners have invented to lock in their customers, and to obtain up-front capital on which to earn interest. They can sell the “product,” usually on an installment contract basis, with high, if not usurious, interest rates.

The buyer thus loses the investment interest that would have been earned by the dollars spent on the Pre-Need contract. It is the mortician that now earns the investment interest—and, to make the deal even sweeter, the buyer gets to pay credit interest to the mortician for the privilege of deferring final payment.

Not bad (for the funeral parlor, that is)!

In addition, the mortician is assured that the mortuary’s investment for cemetery land is quickly returned to the business, along with a nice margin of profit, long before it’s actually needed for the purpose for which its sold. No wonder so many entrepreneurs are dying to get into this business.

Thankfully, not all plans are like this. Sometimes the funeral home does not own the cemetery. And sometimes the pre-need funds can be placed in escrow with all rights and earned interest remaining with the consumer. This is the kind of arrangement to insist upon if pre-need makes sense to you.

The truth is that Pre-Need can be a win-win in many situations. If the funeral parlor and cemetery deliver what is promised in their contracts; if they don’t use the moments after death to impose the old “bait and switch” technique on guilt ridden survivors in an effort to sell higher priced product than chosen by the deceased; and if the terms of a fair and honorable agreement reached with the deceased long before the moment of need are observed, then the Pre-Need agreement may actually provide a bona fide value to the purchaser and to his or her loved ones; and a reasonable and fair business profit to the seller as well.

It is the ultimate layaway plan!

Bob Tell
Author
Dementia Diary, A Caregiver's Journal
http://dementia-diary.com