Funeral Insurance Scam

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Beware of anything called funeral "insurance."

INSURANCE - A formal social device for reducing risk by transferring the risks of several individual entities to an insurer. The insurer agrees, for a consideration, to assume, to a specified extent, the losses suffered by the insured.

Unlike homeowners or life insurance, there is NO risk for the "insurance" company selling funeral insurance. If you plan a $5,000 funeral, you will be expected to pay the full $5,000 for the funeral insurance, whether you pay it all at once or make time payments or whether your survivors end up paying the rest after your death. (The income that the company makes by investing your money pays the company, pays the commission, and should cover funeral inflation.)

Buying funeral insurance is like giving away your money to the insurance company in exchange for an IOU that is usually made out to one of their funeral-home-owning buddies. IT IS NO LONGER YOUR MONEY!

Here's the sad experience Anna Jones had with Fortis Family, a group of so-called "insurance" companies, that specializes in preneed funeral "insurance." She first wrote the FCA office on March 4th, 2001:

Ten years ago when my husband died, I paid for his funeral. I also paid
for mine at the same time. [$2,481.60] I was terribly devastated, even was
considering suicide because of my loss at the time. Thank God I didn't,
because life is good again. I have moved from the area, will not be
going back. I also want to donate my body to science so there will be no
funeral. I have been told I can not get any of my money back from the
funeral home where I purchased the contract. They said the policy has
been sold several times to different companies, I don't even know who has
it. I was under the impression when I paid for it that it was with the
funeral home in DuQuoin, Il. where I took it out. I don't understand how
this works, but it is MY money and it seems like even if I took a loss on
the interest that has accumulated by now, that since my plans have
changed, why can't I get my money back. I can really use it now, and
what will happen when I die, with my money if I can't get it back. Like
I said, I won't have a funeral. Please let me know who I can contact to
get this information. Thank you. Anna Jones

We gave Anna some suggestions, including the address of the Illinois Comptroller who is supposed to be monitoring preneed funeral issues in that state. On March 28th Anna e-mailed:

I wrote to the funeral home as you suggested, he wrote me back
and told me that I would have to contact the Fortis people who hold the
policy to see if I can cash it in. I received a letter from them a few
days ago, and they said that the Funeral Home is the beneficiary. They
said the funeral home is the one who has the discretion as to what to do
with the policy. I sent the funeral home another letter yesterday,
telling them what the Ins. co. wrote me.

I told him once again, that there will be no funeral. Also there is a
chance I will be leaving here even farther and going to California where
my son and daughter in law are living. Even now I live too far from the
area, that if I died they would not be here to take care of me. Surely
there is something that can be done. Would the funeral home get all the
money when there is no funeral? My kids were supposed to get any money
that wasn't spent on the actual funeral but if there is none, what
happens? I just wish I hadn't been in such a crazy state when he died
ten years ago. Then I wouldn't have made such a dumb decision. But the
Searby's were local people where I lived for many years. I trusted them
I guess. Now I just don't know.

The FCA office decided to ask Fortis directly what their policies were. The following letter was faxed to the president of Fortis Family on March 30, 2001.

Alan Feagin, President
Fortis Family
via fax: 888-232-9835
Dear Mr. Feagin:
I am writing to find out your official policy for consumers who might wish to cancel their Fortis funeral "insurance." While prepaying for a funeral has been a blessing for some, for others it has been a disaster when a change of plans is desired or necessary. Specifically, I'd like to know:
May consumers contact Fortis directly to determine the present value of their policies?
What is the rate of growth on a funeral policy with Fortis?
May consumers contact Fortis directly for a refund?
If not, what recourse do consumers have if a funeral home won't request a refund?
What is the rate for determining cash value for a canceled policy?
Lisa Carlson
Executive Director
Funeral Consumers Alliance

On April 3rd, Anna wrote:

In keeping up with my problem, I received another letter from the funeral
home yesterday. They wrote:

Dear Mrs. Jones

You can forward a copy of this letter to Fortis Family Insurance. As far
as the funeral home is concerned you can cash in your policy with the
company. This will make your pre-paid funeral void at that time.

As far as the beneficiary, the funeral homes are the beneficiaries so they
can get paid for the funeral that has been pre-paid.

If Fortis Family Insurance needs more information from us tell them to
contact us. You will have to request the forms to cash in the policy.

David H. Searby

An e-mail from Anna on April 30th:

Hi. It's me again. Just wondered if you had ever heard back from Fortis? It has been several weeks and I still haven't heard from them. [No response from Fortis to the FCA letter either.] I sent them the copy of the letter from Searby funeral home, stating that as far as he was concerned I could cash the policy in. I sent a second letter about 8 days ago, and still I have not received any reply either by phone or letter. I just thought I would keep you up to date on what is going on. I recently got a call from the Comptrollers office in Chicago. He also left a message on the answering machine with Fortis and he didn't get a reply either. As you said, it will be interesting. Thank you once again for all your help. I will e mail you if I get any kind of answer. I may try calling again. Thanks.

This e-mail from Anna on May 1st:

Hi again. I received a letter from Fortis today. They sent a cash
surrender form.

In the letter it says:
Type of plan: Sp Series 15
*Death Benefit: $5,350.

Outstanding Loan: $.00
Loan Value: $2,804.76
Net Cash Surrender Value: $2,827.ll
Beneficiary: Searby Funeral Home

*May Include any additional coverages.

Which of these amounts will they send me? I am not sure as to what this
really means. I thought that you could tell me. Will the funeral home
get the rest and will I get the Net /Cash Surrender Value? I will be
waiting to hear from you before I do anything. Thanks again for all your

Hoping that Anna Jones at least had a sense of humor, we sent her the following e-mail:

Ironically, I was on the telephone with a fella I know in our state Banking and Insurance Dept. when I down-loaded your last e-mail. I read it to him. His advice is to take the loan money, making sure that not repaying the loan won't cause the policy to lapse. Then change the beneficiary any time you want to another FH where you live now or where you're moving to when you do. Most med schools require that the family pay to have the body delivered to the med school (tho' it DOES vary from med school to med school). Anyway, you'd surely have enough left in the policy to get your body there and still have $1,500 or so left over for a hellova reception your kids can ask the FD to pay for.

Because I'd never gotten a response from the Fortis president, Sue Simon, editor of Funeral Monitor,managed to chase down a live person to talk to there, and guess what she learned: Fortis is going to charge Anna 8% interest on the "loan." Charging Anna interest to borrow her own money? Yikes! At that rate, the balance of Anna's death benefit money will vaporize in less than 12 years, if the interest is charged against her account; then the policy WOULD lapse. Yes, Fortis has been growing Anna's money at about 8% a year, much faster than most other funeral "insurance" schemes, and Anna didn't have to declare the interest on her income tax. But if Anna had put her money in a long-term CD, she'd have over $4,000 today. Fortis should be ashamed for swiping almost 10 years of interest. m

But Fortis isn't the only company running a funeral "insurance" scheme. Forethought (owned by the folks who make Batesville caskets) estimates about 4% annual growth on their "policies," depending on age and mortality rates among other things. This isn't quite enough to keep up with funeral inflation in most cases, so you'll want to see what is guaranteed and what happens if the casket you picked out is no longer available. (A substitute casket needs to be of equal quality and construction, not equal "value"-price--which is constantly going up from what you paid). And will you get all your money back from Forethought if you cancel after a few years? Only if you live to be 100, I was told by the customer service rep.

NOTE: In some states, funeral directors can take your prepaid funeral money and convert it to funeral "insurance" WITHOUT YOUR PERMISSION, pocketing a commission in the process!
Comments (12)
1 Tuesday, 03 November 2009 11:58
clinton auman
I paid about 3200.00 in prepaid life insurance through fortis family and i discontinued it some years back becauseof financilal reasons. Can i recoup any of this money? So far all I can find is one check sent to them that they cashed at that time Thank you
2 Tuesday, 03 November 2009 12:09
Josh Slocum - FCA Exec director
Clinton - remember that you're leaving a comment on the site, not sending an individual email to us. If you want to be sure someone sees your question, the comments section is not the best place.

No, you won't be able to get anything back on the insurance policy that you canceled. Insurance isn't like a bank account - if you stop paying premiums and cancel, you get nothing back, unfortunately.
3 Friday, 25 June 2010 01:53
Funeral Insurance Australia
yeah, probably an email or a phone call would work better
4 Wednesday, 23 March 2011 10:51
i have 2 sisters that have not communicated with me from 1997,and my mother b4 she went in nursing home had indicated she had gone to local funeral home and signed a policy over for prepayment of her sisters have been her power of attorney since 2000,and are now telling me even though my mother is already buried that the policy is no good..they want my brother and i to fork up money....but we have no proof as to any of this...and i reluctant to trust either of them...
5 Wednesday, 21 March 2012 09:00
D. Potts
Hello all, I represent a funeral home as a pre-need specialist. We do not work with Fortis, but unfortunately the narative above sure does paint an ugly picture of the industry as a whole. One that I do not find to be accurate at all in my experience with our underwriter, our funeral home, and our clients.

Since 2005, there are conditions that do make a refund of the policy monies not possible, but they are a tradeoff that in other ways protects the consumer. Most notibly in Michigan, if a person is applying for Medicaid, then the monies used to fund their funeral are a recognized expenditure as part of what is known as a 'Medicaid Spenddown'. However these arrangements MUST be placed into an Irrevocable Funeral trust or policy. Meaning no amount of the monies can be refunded - especially if the arrangements are changed to something of lesser service value than originally set up. Why? Because the State wants to ensure that the consumer applying for Medicaid assistance does not have access to other funds (like cashing in a funeral policy), so they require that no money can be refunded to the client. The benefit to the consumer is that their funeral is paid for with existing funds, which the State does not count against them as an asset when calculating eligibility for Medicaid. A win-win.

The client can ALWAYS transfer the policy to any other funeral home. Some contracts state that the original Funeral Home contract provider can hold back up to 9.091% for administrative fees, but not all funeral homes will state this nor enforce it.

The client can also cancel, or make changes to the arrangements anytime prior to the funeral home providing some level of service of the contract (typically when the body is collected).

The other item with which I take issue was the statment:
"If you plan a $5,000 funeral, you will be expected to pay the full $5,000 for the funeral insurance, whether you pay it all at once or make time payments or whether your survivors end up paying the rest after your death. "

That is simply NOT true.

The whole idea of the protection afforded by a policy is that the service and merchandise parts provided by the funeral home are guaranteed. The current price is locked in, and if the client dies prior to full payment, the guranteed items are paid for in full by the policy.

THE ONLY part of arrangements that the family may have to pay additional on is any increase in costs in the 'cash advance' items area - which is money paid to third parties such as the county for Death Certificates, or actual obituary costs, or cemetery costs that may have risen above the estimated costs (if any funds were collected in advance).

Also, the only reason a clients arrangements would not be funded in full - especially when they die prior to full payment, is if they have a severe illness noted at time of application. And only this action places them under a partial payout condition. Which means for a period of either 1 or 2 years (known as graded benefit) if they died, the payments would stop, but they would only recieve 25% if death occurs within 1 year, or 50% if death occurs in second year. After this period has passed, it is 100% coverage payout no matter when they pass, and no payments continue by the family.

They other good news is that the payments DO STOP at the end of the term (3,5,10, or 20 year terms). unlike term life insurance where a person would pay until death - many times paying far more than the death benfit they recieve, plus this does not lock in rising costs of funeral arrangements, plus it is many times looked at as an asset and must be surrendered and cashed out in order to apply for Medicaid as mentioned earlier.

This article casts a poor light on our industry and a tool that many times pays out for services and merchandise far more than the family has paid in - just like house insurance or car insurance. I think it is a shame what Ms. Anna Jones endured, but to me, her experience is a reflection on a few non-responsive people at both the funeral home and at Fortis. It is unfortunate, but certainly NOT the norm.

I commend you for looking out for the consumer in the funeral business, but would we not all be better served if your information
were balanced and accurate?

I am proud to be providing execellent service and products to my families in Michigan,

David Potts
Precoa - Preneed sales
O'Guinn Family Funeral Homes
Clio, Birch Run, Montrose, Michigan.
6 Friday, 07 June 2013 18:12
Thank you.
7 Friday, 21 June 2013 18:52
So what your. saying is if i try and look out for my children. by purchasing TERM LIFE INSURANCE IT'S considered an asset ? How is a Mother or Father to protect their children from paying for the parents death IF THE GOVERNMENT , MEDICAID CONSIDERS TERM LIFE INSURANCE AS AN ASSET. WE AS PARENTS CAN NOT COLLECT IT. TRY TO RELIEF FINANCIAL BURDEN FROM OUR CHILDREN. THEY. ARE ALREADY GRIEVING . PLEASE COMMENT WITH POSSIBLE SOLUTION .
8 Saturday, 18 July 2015 12:58
May Azevedo
My mother purshased a funeral insurance through FORTIS and she wanted to cash it in because she decided to move to the philippines, can she get a refund? Or will she be able to use Fortis in the philippines? Please help!
9 Saturday, 18 July 2015 13:05
May Azevedo
My mother purchased Preneed/Fortis insurance and wanted to know if she can cash it in because she decided to move to the Philippines. Can she get a refund? Or will she be able to use it there in the philippines? Concern daughter. Please help!
Sincerely, May
10 Saturday, 18 July 2015 21:58
May Azevedo
My mother purshased a funeral insurance through FORTIS and she wanted to cash it in because she decided to move to the philippines, can she get a refund? Or will she be able to use Fortis in the philippines? Please help!
11 Sunday, 19 July 2015 14:32
Josh Slocum, FCA exec. director
Hi May,

You can cash in an insurance policy, but you will not get back a full refund of what you paid in. Often no more than half.

Now, the proceeds of an insurance policy can be used to buy anything. So if your mom keeps the policy in effect, when she dies you can use the proceeds for funeral arrangements in the Phillipines, or for anything else necessary.

You should look carefully at your cash-out amount to decide whether it makes better sense to keep the policy in place or to cash it out ahead of time.
12 Thursday, 12 November 2015 15:21
Pre-need funerals are a blessing! I knew a man that passed away and he bought a prepaid funeral for $3,000.00 in 1993, for everything. That means his price was locked in Hello! Today you can't buy a funeral in our area for under 9,000.00. The average funeral if you don't want the cheapest casket known to man is $10-$12,000.00 for someone. That doesn't include a grave and headstone at a cemetery those are sold separate. You're better off to go with the pre-need now and give more money to your family later. Also the preneed allows you to make payments. Even if you have to pay interest on a preneed payment, you still end up paying less for a funeral than it would be when you actually pass away if you live 10 years even. If you have the ability to do it, its a no brainer save your family from having to worry about that when you die. If I could have bought a car 10, 20, or 30 years ago and not had to pay today's prices for a new one you bet I would. 30 years ago a dodge Ram truck was $8,000.00 Brand new right off the lot Hello!? Funeral cost double every 10 years or more! and like that guy said earlier if you have any assets you can't get medicaid and a prepaid funeral is NOT considered an asset and it can't be taken from you later if you need to go into a nursing home. I don't believe taking it out is wise counsel especially 10 years later because funeral cost by then probably nearly doubled so if you look at it at that point of you your money actually doubled when you look at todays prices of a funeral.

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