What is a preneed funeral and cemetery bond?
Preneed funeral bonds are legally binding agreements between three parties: funeral homes, the government agency responsible for regulating local funeral homes, and a surety company.
The government agency is the Obligee and establishes the obligations that the funeral home (the Principal) must follow. The surety (also called bonding company) issues the bond guaranteeing the performance of the funeral home.
Cemetery bonds are agreements where the owner of a cemetery is the Principal and the government agency responsible for regulating cemeteries is the Obligee. These bonds help ensure that owners maintain the property and that graves are not damaged.
Why do you need a funeral bond?
Funeral bonds are required in some states for funeral homes offering preneed funeral insurance. With the preneed agreement, the customer plans for their funeral in advance by establishing all the details of the funeral service. The funeral director calculates the funeral expenses as a basis for the preneed insurance plan. The customer then pays the amount in a single payment or in monthly installments.
When the surety company issues the bond, they provide the government agency a guarantee that the customers of the funeral home will receive payment for financial losses resulting from a breach in the preneed funeral contract.
If the funeral home fails to meet the obligations agreed upon in the contract, the surety will pay out any damages up to the bond amount. The funeral home is ultimately liable for the losses and is legally required to reimburse the surety company for any damages paid under the bond.
How much does a funeral bond cost?
Funeral surety bond costs vary depending on the total bond amount and the premium rate. The government agency sets the required bond amount and the surety company determines your premium rate, which is the percentage of the total bond amount you pay as the premium.
Premium rates for funeral bonds typically cost between 1% and 5% of the total bond amount. Most funeral bonds require credit checks. During the application process, the surety company evaluates your financial strength and industry experience. Applicants with good credit generally receive the lowest rates, however, bad credit will not prevent you from securing a funeral bond. EZ Surety still offers competitive rates to individuals with low credit scores or other financial issues.