Pay for the funeral, in advance

When completing insurance applications for clients, it’s often necessary to address touchy subjects—sometimes hitting on potentially embarrassing issues such as clients’ spending habits, their medical histories and even the quality of their marriages. But it’s a process that’s critical if we are to help people effectively plan for their financial futures.

Which raises the question, are there are any topics you should never discuss with your clients? Back when I started my practice, one subject I swore I’d never broach was funeral planning. Talking shop about wills and powers of attorney, including dying-with-dignity provisions, was never a problem, but I drew the line when it came to discussing types of caskets desired or preferred musical selections.

But I reached the conclusion that these subjects should be talked about because it’s during these emotional family times that a lot of purchasing power takes place. Aside from the regulars—tax and estate planning, family planning, and business succession planning—I’ve come to the opinion that funeral planning should be the final subject discussed under the estate planning banner in a client’s binder.

When people pass away, their families are confronted with a myriad of decisions that must be made quickly and irrevocably. It’s said a wedding requires people to make a hundred decisions, but they’re spaced out over the course of a year or longer. When someone dies, a similar number of decisions must be made but the time frame is compressed into a few days, or at most a week.

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Fortunately, there’s a new service emerging that can help advisors address this very issue, while at the same time removing some of our potential pangs of embarrassment. Everest Canada is offering a comprehensive funeral planning service that is available in all provinces except Quebec, Newfoundland and Prince Edward Island. Everest isn’t an insurance company or financial services provider, but rather an independent consumer advocate that provides the planning services through advisor firms. All client contacts are handled by telephone.

With this service, after discussing how the client’s wills and powers of attorney should be designed, I can then confidently bring up the subject of funeral planning as the natural conclusion to the end-of-life issues topic. I stress to the client that although this is a deeply personal subject, it’s also fraught with problems for the family members if left unplanned. Many personal development coaches ask people to think about what their obituaries would look like if written today. I take it a step further by turning the question around and asking clients, “What would your funeral look like? Who would be invited? What hymns are to be sung? Is there to be a cremation or a burial?”

Everest’s process is simple. Clients complete and submit a form to the company and an Everest advisor contacts them directly and welcomes them to the program. Clients are sent a package, including a planning guide which details key decisions to be reviewed and completed. This can be done by the clients themselves or with the help of an Everest advisor over the phone. During this process, all the funeral decisions and details are arranged—right down to the casket selection and the music. The client’s instructions are recorded in a “My Wishes” plan, a copy of which is mailed to the client to keep alongside his or her will. Changes can be made as often as necessary and at no charge.

The second part of the service takes place when the client dies. Since the Everest documents are kept with the will, the executor or other family member calls the company, any time of day or night, using a toll-free number, and a representative goes over the “My Wishes” portion of the plan with the family. The representative would then conduct a phone survey of local funeral homes to find the best price and convey that to the family member. And if requested, they’ll help negotiate the pricing with the selected funeral home. Once the family makes a selection, Everest communicates the client’s wishes directly and continues to serve as an advocate to ensure each element of the plan is understood and respected. They will also help the family select other service and product providers, such as cemeteries and monument or memorial suppliers.

How the client pays for the Everest’s services is rather unique. The client buys a permanent life insurance policy, underwritten by Winnipeg-based Western Life, for an amount between $5,000 and $10,000. The premium can be paid monthly or once a year. The underwriting requirements are simple: You need to have had good health for the previous five years and not have been declined for insurance during that period. The clients also can’t have any alcohol or drug problems in the past three years, and can’t have been hospitalized for more than four weeks during the past three years. That’s the extent of it, but the underwriter does place a heavy reliance on the two-year contestability period.

By buying the coverage, the client receives both the services of Everest, as well as the tax-free death benefit to pay for the funeral. The insurance premiums are much higher than term-to-100 prices but given the services you receive, and the potential savings from having Everest shop for the best deal, pricing shouldn’t be the issue. This is not a reimbursement product and we’re not trying to augment the client’s other insurance coverage. The deal with Everest and Western Life simply works out to pay for the funeral. A client, for example, is going to put about $3,500 into premiums to get $5,000 out. That’s not the traditional insurance win, but it does allow the client to essentially pre-pay for his or her funeral and solidify the arrangements beforehand.

The average cost of a Canadian funeral is trending down to approximately $6,000, according to the National Obituary Service, because more and more people are choosing cremation over traditional burial. Those intending a more elaborate funeral would be able to purchase a policy with a larger face value. The actual cost of the policy obviously depends upon the age and smoking status of the client. If one of the spouses is uninsurable or older than 81, then they can pay a yearly fee of $995 in lieu of purchasing the policy, however, the other spouse has to be insurable and enrolled in the Everest plan.

A colleague once told me a story about a family member diligently canvassing several funeral homes to get quotes for an elaborate funeral. He gave exact details, right down to the casket model number, yet stunningly, the quotes ranged from $10,000 to $16,000. This does not appear to be an isolated case. The U.S.-based Funeral Consumers Alliance recently launched an antitrust lawsuit against several companies, including the Canadian-based Alderwoods (formerly Loewen Group), that alleges “consumers of funeral products and services, who are under severe emotional distress and time pressure at the time of purchase, have been easily and routinely preyed upon.”

That’s certainly not to say all funeral homes are crooked, but these types of stories do build the case for having clients express their final preparation wishes, and then have an unbiased third-party step in and handle the financial negotiations on behalf of the grieving family. It’s a useful tool for advisors who want to help clients plan for the last step. Bruce Cumming, CFP, R.F.P., CIM, CLU, Ch.F.C., is the founder of Cumming & Cumming Wealth Management Inc. in Oakville, Ont.