The market for preneed funeral funding is big business. Not only does it involve funeral homes but also insurance and trust companies and major investment firms. The funeral industry is certainly not immune to the economic crisis. Several insurance companies that invest funeral homes’ prepaid funeral funds have become insolvent, including one firm here in NH, ACA Assurance. And returns on funds placed in a preneed trust are earning little returns.
Funeral home owners are struggling to ensure that that they can earn a sufficient return on consumer’s funds to lock-in their prices (one of the major reasons people choose to prefund their funeral). But prepaid funerals are important to funeral homes. First and foremost, they provide the company a level of comfort that they will have business in the future. Firms that do not offer prepaid funerals or do not market this service aggressively risk the chance of other more savvy firms taking away future business. In addition preneed funds, if invested wisely, would provide a rate of return that would allow the funeral home to perform a funeral for a profit, even if the funeral had been paid for years in advance. But all this has changed in the last several years.
Will funeral homes still offer the opportunity for consumers to prepaid for their services. Yes, I think this will always be available. But many firms around the country and are taking another look at the viability of locking in these funerals indefinitely, assuming all the risk and potentially having to perform a service at a loss. My belief is that what funerals homes offer today will be much different than what they offer five years from now.