Preneed Funeral Contracts and Preneed Sales Agent Regulation
What the exam tests
Preneed is the highest-risk area for consumers and the most heavily tested. Expect questions on contract form and disclosure, funding through trust or insurance, agent licensing, deposit timing, recordkeeping, and refunds on cancellation.
Contract and funding rules
- A preneed contract must be in writing, identify the purchaser and beneficiary, itemize goods and services, state the price, and disclose whether it is guaranteed or non-guaranteed.
- Funds must be placed in trust with a qualified trustee or used to purchase a life insurance policy naming the provider as beneficiary, under the funding method elected.
- Trust deposits must be made within the period set by statute and board rule; commingling preneed money with operating funds is prohibited.
- Sellers must be registered preneed sales agents, working under a registered provider; an agent may not sell before registration.
- Annual reports and trustee statements must be filed, and records must reconcile contract by contract.
Refunds and cancellations
Ohio gives purchasers cancellation rights with prescribed refund calculations. On a non-guaranteed contract, the provider may charge the then-current price and the trust balance is applied; on a guaranteed contract, the provider bears the shortfall. Unused merchandise funds are returned per statute.
Worked example
An agent sells a $9,000 non-guaranteed funeral contract funded by trust. At death the trust holds $11,500 but the current price is $10,200. The trust balance is applied, the family pays nothing extra beyond price, and the excess is handled as the contract and statute direct - the agent's error is failing to explain that the family could owe more if the trust had underperformed.
Traps that cost marks
Assuming a preneed contract controls disposition of remains (it does not); believing insurance-funded and trust-funded contracts follow identical refund rules; and missing the requirement that the agent be registered before soliciting.