Michigan prepaid funeral and funeral insurance rights

Michigan’s Prepaid Funeral and Cemetery Sales Act requires that, apart from a cemetery option for cemetery merchandise, all funds received for a prepaid contract be held in escrow by an escrow agent for the benefit of the contract beneficiary. A contract may allow an additional commission of up to 10% of the contract price that is not escrowed. The escrow agent must send the buyer a notice of the date and amount of the deposit and the agent’s name. Ask whether your contract charges a commission and who the escrow agent is. [1]

Unless the buyer waives it in writing, the buyer must receive a statement at least once a year showing the current balance, the fees or expenses charged and the refund due if the contract is cancelled. Ask for the most recent statement before you decide anything about the contract. [1]

A buyer may cancel at any time before the beneficiary’s death with 30 days’ prior written notice. For funds escrowed in full, the refund is at least 90% of the remaining principal and income if no commission was charged, at least 95% if a commission of 5% or less was charged, and 100% if a larger commission was charged. Cemetery merchandise escrowed under the cemetery option is refunded under a separate rule. Ask the seller to put the refund calculation in writing. [2]

If the seller or provider assigns or transfers its obligations under your contract to another provider, it must notify you in writing. If you cancel within 30 days of that notice, you are entitled to 100% of the remaining principal and income plus any commission charged. When the transfer is part of the sale of a business, this applies only if more than 50% of the ownership interest changes hands within 12 months, and no refunds are available for burial rights or other land interests, crypts, inscribed grave memorials or niches. Ask to be told in writing if your provider changes. [2]

A fully paid guaranteed price contract made with an applicant for or recipient of public assistance can be made irrevocable at that person’s request, within limits set by law. An irrevocable contract cannot be revoked or cancelled by the seller, provider, buyer or estate, but the amount can be reallocated to different goods and services, and the contract must be assigned to another provider on written request made before the services are performed. Ask your benefits caseworker how the contract will be treated before choosing this option. [3]

In Michigan, the proceeds of a life insurance policy or annuity can be assigned, in writing on a state-approved form, to pay for funeral or cemetery goods and services. The assignment can be revoked by the assignor, the assignor’s successor or, in some cases, the representative of the insured’s estate before the goods or services are provided. If it is revoked, the death benefit is paid under the policy’s beneficiary designation. Ask what the policy would pay, and to whom, if the assignment is revoked. [4]

When a producer associated with a funeral home or cemetery sells a policy meant to be assigned to it, the producer must disclose in writing that the goods and services may instead be bought with payments held in escrow, and that a purchaser who cancels a prepaid funeral contract is entitled to a refund of at least 90% of the principal and income earned. If the purchaser cancels the policy within 10 days after receiving it, all premiums must be refunded. The funeral or cemetery sale may not be conditioned on buying the policy. Ask for the written disclosures and compare the escrow option before the 10 days run out. [4]