The $14,000 funerals. . .that cost $28,000

3/6/2010— Another example of the financial dangers of prepaid funerals. This Iowa couple was shocked to discover they’d have to pay almost $28,000 in insurance premiums for funerals that would cost only $14,000.  Read their complaint below.

Iowa Department of Public Health
Bureau of Professional Licensure
Lucas State Office Building
Des Moines, Iowa 50319-0075

Date :2nd of March 2010

Complaint against: Janice Railsback / Christy Smith Funeral Home

Nearly four years ago my husband and I went to the above named funeral home to
prearrange our funerals, not because we were concerned about Medicaid eligibility but to do the responsible thing in preparing for our own deaths and relieve our children from this burden. The total price for what we picked out came to about $7,000 each for a total of $14,000 or so.

We did not have that kind of money to pay for it all at once and were told we could make payments toward an insurance policy to cover us. After some discussion, a monthly payment of $230.83 was settled on, and we signed the papers the funeral director handed us, feeling sure he had our best interests at heart.

• At no time were we told that a trust was an alternative to insurance and that a trust can be built with multiple payments also.
• We were never given the pros and cons of each funding vehicle or given a choice for which funding we might prefer to use.
• At no time were we informed that the funeral director would receive a commission for selling insurance instead of a trust, an obvious conflict of interest on his part, of which we were unaware at the time.
• At no time were we informed of what the total financial obligation would be with the installment plan for insurance or how that might compare to the actual funeral costs. If a “ten year payment plan” was mentioned, we assumed we had ten years in which to pay the $14,000 we thought was due, not double that amount.
• At no time were we informed what the consequences would be if we could no longer maintain the rate of payment we initially thought we could handle or if we simply wanted to change our funeral plans to something more modest.
• We felt intimidated by the funeral home to initial the “irrevocable” part. We are not eligible or applying for Medicaid now or any time in the foreseeable future, but were warned the state could attach our bank accounts and our house if we didn’t sign.

After sending more than $11,000 to Homesteaders Insurance over the past four years, we recently decided to see what the exact balance due would be. The funeral home told us to call the insurance company. We were shocked to learn from Homesteaders that we hadbeen locked into a 10-year payment plan at the rate of $230.83 a month. At that rate, we would have to pay $27,699.60, about double of what the actual funerals would cost.

If we stop paying on this plan now, we get $6,000 back, not the $11,000 that we’ve paid. We have lost over $5,000 of our funeral money because of this scheme.

We are filing this complaint against Janice Railsback/ Christy Smith Funeral Home
because we believe the staff have violated the following Iowa laws by failing to give us
informed consent to this transaction:

147.55 Grounds.
A licensee’s license to practice a profession shall be revoked or suspended, or the licensee otherwise disciplined by the board for that profession, when the licensee is guilty of any of the following acts or offenses:
1. Fraud in procuring a license.
2. Professional incompetence.
3. Knowingly making misleading, deceptive, untrue, or fraudulent representations in the practice of a profession or engaging in unethical conduct or practice harmful or detrimental to the public.

156.9 Revocation of license to practice mortuary science. . .
2. In addition to the grounds stated in sections 147.55 and 272C.10, the board may revoke or suspend the license of, or otherwise discipline, a funeral director for any one of the following acts:
a. Knowingly misrepresenting any material matter to a prospective purchaser of funeral merchandise, furnishings, or services.

We are not asking for a revocation of any license. As a remedy to our complaint,
however, we are asking that the funeral home arrange for the return of all prepaid funeral funds to date including interest.

Sincerely,
Donald V Zeman
Gayle A Zeman

cc: Christy Smith funeral home
cc: Attorney General’s Consumer Protection Division
cc: Graham Cook, Homesteaders Insurance
cc: Dennis Britson, Iowa Insurance Division
cc: Iowa Funeral Directors Association
cc: Lisa Carlson, Funeral Ethics Organization
cc: Joshua Slocum, Funeral Consumers Alliance
cc: AARP of Iowa
cc: Des Moines Register