Like other costs, the funeral home’s charges may change between the time of the prearrangement and the time the funeral takes place. Some funeral homes, but not many, guarantee the prices they quote for your prearrangement.
In a guaranteed price agreement, the funeral home agrees to provide the goods and services you have selected for the amount in the prepaid funeral account at the time of the death, regardless of whether the retail value of those goods and services exceeds the amount in the account at the time of death.
With a non-guaranteed agreement, there is no commitment made by the funeral home to accept the amount available in your prepaid funeral account at the time of death as full payment for the goods and services you selected as part of your prepaid agreement. At the time of death, the retail value of the goods and services selected will be calculated. If the value of your account is less than that of the goods and services selected, your family has the flexibility to either pay the difference and follow through with your original arrangements or to alter the arrangements according to need.
Both types of plans have certain advantages, disadvantages and limitations. Making prearrangements with an interest-bearing trust can help keep the available funds in line with inflation. Find out the current interest rate or yield for the plan you have selected, and check your account periodically to verify that it is keeping up with inflation.
Most of all, make sure that you fully understand the terms, conditions and investment strategies of whatever prefunding vehicle you choose.