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FAQs #26

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Q26. My parents took out a Pre-Need Plan Group Life Policy in 1997. My father's was a five year plan and my mom's a 10 year plan. I may be wrong but it appears that my mom is putting out a lot of money for this policy which gives her a $5914 death benefit but she is paying interest all these years. Her payment is $107 every month since April 1997. If she stops now the cash value is only a little more than $1000. Yet, if she keeps paying 107 she'll be putting out more money for a small return. Any suggestions? Also, she would like to switch funeral homes. Can this be done?
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A26. Chris Goes, Owner/Director, Goes Funeral Home 970.482.2221:
><b>I've never been a fan of pre-paying and this might be one of the reasons why I don't like them. There are, however, times when prepaying is a good idea. A paid up policy isn't counted as part of assets when applying for Medicaid. Also, when on a fixed income, paying over time is the best way to insure the funeral desired is carried out. Paying over time is more costly, but it is insurance along the way. So that in the event of death before the 10th year, the policy pays up. That's why the added cost. I wouldn't cancel, but you could consider paying it off and then having the growth added from there. Insurance isn't an investment as much as it gives peace of mind. And it's very safe.
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Here's the important question: Is a $6,000 funeral still desired? I did the math, and she's paying thousands more than the face value, but it typically is guaranteed by the offering funeral home. Provided they're still in business when needed. There are a lot of factors to consider, but it'd be a shame to waste the payments already made. How is the health of the insured? Most pre-paid funeral plans are transferable to any funeral home. I've not come across many that aren't. Great-Western and Forethought are easily transferred.
><p>I hope this helps. Contact me if I can clarify further.
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Elizabeth Kelly , Elderlaw Attorney
>You may want to contact the Colorado Division of Insurance Office in Denver for more information on these types of policies.<i>
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Ali Pethe
Ali Pethe
Lutheran Family Services, Older Adult & Caregiver Services
2850 McClelland Drive, Suite 3200
Fort Collins, CO 80525
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