Planning ahead for a funeral is one of the kindest things you can do for your family. In Middle Tennessee, many people consider one of two paths: prepaying through a funeral home, or buying a small life insurance policy designed for final expenses. Both can work, but they’re very different products. Here’s how preneed funeral plans compare with final expense insurance in Tennessee.
Quick takeaway
- A preneed funeral contract is an agreement with a funeral provider for specific goods and services. Final expense insurance pays cash to a beneficiary.
- Tennessee rules require preneed contracts to state whether the trust is revocable or irrevocable, among other disclosures.
- An irrevocable preneed trust is non-refundable, according to Tennessee’s required contract language.
- Final expense is more flexible, but your family still has to make the arrangements and pay the bills.
What a preneed funeral contract is
A preneed contract is an agreement you make in advance with a funeral home or cemetery for specific funeral goods and services, like a casket, a service, or cremation. You pay now, in a lump sum or installments, and the provider agrees to deliver those goods and services when the time comes.
In Tennessee, preneed sellers are regulated, and the state’s rules require specific disclosures. Under Tennessee’s preneed contract rule (Tenn. Comp. R. & Regs. 0780-05-10-.13), every preneed contract must, at a minimum:
- State whether it establishes a revocable or irrevocable trust account
- Clearly disclose whether the funds will fully pay for the goods and services listed, or will be applied to a price set at the time of death
- Fully disclose the pricing arrangement and any contingent costs to the buyer
- Identify the trustee holding the funds
- Explain what happens to any money left over after the funeral is paid for
The rule also requires the seller to give the buyer a copy of the contract when it’s signed, and it says contract forms must be submitted to and approved by the Commissioner.
Revocable vs. irrevocable
This is one of the most important choices in a preneed contract:
- Revocable: under the rule, the contract must state that the purchaser can receive any or all payments made, plus earnings, on demand before the death of the person the contract covers.
- Irrevocable: the contract must state in bold, capital letters that the trust account is irrevocable and the funds are not refundable. The same required language says accumulated trust principal and interest can be transferred to pay funeral expenses at any licensed funeral establishment as provided by law.
People sometimes choose irrevocable contracts for planning reasons, including some public benefits planning. If that applies to you, talk to an elder law attorney before you sign.
What final expense insurance is
Final expense insurance is a small whole life policy, usually with a modest death benefit, designed to cover funeral costs and other end-of-life bills. When you die, it pays the death benefit in cash to your named beneficiary. That person can use it for the funeral, medical bills, debts, or anything else.
Our guide to final expense insurance explains level, graded, and guaranteed issue policies, including waiting periods.
Side-by-side comparison
- What you’re buying: Preneed buys specific funeral goods and services. Final expense buys a cash death benefit.
- Who gets the money: Preneed funds go to the funeral provider through the trust. Final expense pays your beneficiary.
- Flexibility: Preneed is tied to the arrangements in the contract, though irrevocable trust funds can be transferred to another licensed funeral establishment as provided by law. Final expense money can be used for anything.
- Price protection: Some preneed contracts lock in the price of the listed goods and services. Final expense pays a fixed amount, and funeral prices may rise over time.
- Health questions: Preneed contracts generally don’t involve medical underwriting. Final expense policies may ask health questions, or use guaranteed issue with a waiting period.
- Other costs: Preneed may not cover cemetery charges, flowers, travel, or medical bills unless they’re included. Final expense can help with all of those.
Questions to ask about a preneed contract
- Is the trust revocable or irrevocable?
- Does the contract fully pay for the listed goods and services, or only part of the price?
- What items are not included, like cemetery charges, opening and closing the grave, or a headstone?
- Who is the trustee, and how can I check the account?
- What happens if I move away from Middle Tennessee?
- What happens if the funeral home is sold or closes?
- If I cancel, how much is refunded, and when?
Questions to ask about final expense insurance
- Is it level, graded, or guaranteed issue?
- Is there a waiting period before the full benefit is paid?
- Do premiums ever increase?
- Is the death benefit enough for the funeral and other bills?
- Who is the beneficiary, and do they know about the policy?
Using both together
Some families combine the two: a preneed contract for the specific arrangements they want, plus a small final expense policy for costs the contract doesn’t include, like medical bills, travel for family, or a headstone. Others choose one or the other. The right mix depends on how specific your wishes are, your budget, and your health.
If you have a complaint about a preneed contract
Preneed sellers in Tennessee fall under the Department of Commerce and Insurance. If you have concerns about a contract or a seller, TDCI is the place to ask questions or file a complaint.
Frequently asked questions
Is a preneed funeral plan the same as final expense insurance?
No. A preneed contract is an agreement with a funeral provider for specific goods and services. Final expense insurance is a life insurance policy that pays cash to your beneficiary.
Can I get my money back from a preneed contract in Tennessee?
It depends on the contract. Tennessee’s rule says revocable contracts must let the purchaser receive payments and earnings on demand before death. Irrevocable contracts must state the funds are not refundable.
Can I transfer a preneed contract to another funeral home?
For irrevocable contracts, Tennessee’s required contract language says the trust funds are transferable to pay funeral expenses at any licensed funeral establishment as provided by law. Ask your seller how a transfer works.
Which is better, preneed or final expense?
It depends on your goals. Preneed locks in specific arrangements, while final expense gives your family flexible cash. Many people compare both, or use both together.
Next step
Planning ahead is a gift to your family, and the right plan depends on your wishes. Learn more about final expense insurance with Eric Henry, Insurance Agent, and ask Eric to compare final expense options alongside any preneed contract you’re considering.
Coverage descriptions are general information only; your policy documents determine actual coverage. Availability varies by carrier.
