Colorado Funeral Directors Association

Advance Funeral Arrangements and Pre-Need Funeral

According to Colorado law (Colorado Revised Statutes 10-15-102), the definition of a "Preneed contract" means any written contract, agreement, or mutual understanding, or any security or other instrument that is convertible into a contract, agreement, or mutual understanding whereby, upon the death of the preneed contract beneficiary, a final resting place, merchandise, or services are provided or performed in connection with the final disposition of the preneed contract. Consideration for a preneed contract is funds, deposits, or the assignment of life insurance benefits.

Colorado currently permits two methods of funding for “preneed” funeral plans.

  1. With a Trust-Funded preneed contract, a consumer purchases specific funeral services and merchandise at a guaranteed price from a preneed contract seller. A written contract detailing the types of services and/or merchandise being purchased is required. The consumer pays the preneed contract seller a sum of money, either on an installment payment plan or in a single payment transaction. The preneed contract seller is then required by Colorado law to place a minimum of 75 percent of these funds in a trust account with a qualified trustee.
  2. Under the Insurance-Funded preneed contract, the consumer purchases a life insurance policy and the policy proceeds are used to pay for the funeral. The funeral home or mortuary is the insurance policy assignee and is paid directly by the insurance company after performance of the preneed contract. All cost increases incurred by the funeral home or mortuary at the time of need are paid out of the benefits from the life insurance policy up to the seller's current price list. It is important to note that these arrangements involve two separate contracts, the preneed contract and the life insurance contract which is used to fund the preneed contract.
Any person or business that sells or offers to sell funeral goods, merchandise or services through a preneed contract MUST be licensed by the Colorado Division of Insurance. 

Whether you select an Insurance-funded or Trust-funded option, verify that the person or business is licensed with the State of Colorado as a “Preneed Contract Seller.” 

For a list of licensed Preneed Contract Sellers, go to the Colorado Division of Insurance.

For more information, log onto the Colorado Division of Insurance web site at: or call 303-894-7499.

Here are some additional consumer caution tips from the Colorado Division of Insurance:

  • If it sounds too good to be true, it usually is. Beware of prices that are significantly lower than others you've been quoted.
  • Give yourself enough time to investigate; don't be rushed into a decision.
  • Examine the policy to determine the actual coverage to make sure the promised benefits are FULLY insured by a licensed insurance company.
  • Always pay with a personal or business check, or a cashier's check, not cash.
  • Always obtain a receipt for any monies paid.
  • A policy will be provided to you, if you have purchased legitimate insurance.

The National Funeral Directors Association has prepared its NFDA Bill of Rights for Funeral Preplanning to assist consumers in making any decisions on preplanning or prefunding contracts. NFDA Bill of Rights for Funeral Preplanning 5 An ethical and reputable funeral home will ensure the following rights and protections:

  1. Provide you with detailed price lists of goods and services before you make your selections.
  2. Provide to you, at the conclusion of the funeral arrangement conference, a written statement listing all of the goods and services you have purchased and the price.
  3. Give you a written preneed funeral contract explaining, in plain language, your rights and obligations.
  4. Guarantee in the contract that if any of the goods or services you have selected are not available at the time of need, goods and services of equal or greater value will be substituted at no extra cost.
  5. Explain in the contract the geographical boundaries of the funeral home’s service area and under what circumstances you can transfer the preneed contract to another funeral home if you were to relocate, or if the death were to occur outside of the service area. State in the contract where and how much of the funds you pay will be deposited until the funeral is provided.
  6. Explain in the contract who will be responsible for paying taxes on any income or interest generated by the preneed funds that are invested.
  7. Inform you in the contract whether, and to what extent, the funeral home will guarantee the price of goods and services you are purchasing. If the prices are not guaranteed, the contract will explain who is responsible for any additional amounts that may be due at the time of the funeral.
  8. Explain in the contract whether and under what circumstances you may cancel your preneed contract and how much of the funds you paid will be refunded. There are several methods available to pre-pay for a funeral:
    • A regulated trust can be established by a licensed funeral director. A life-insurance policy can be purchased, equal to the value of the funeral.
    • Individuals can establish a savings or certificate of deposit account earmarked for funeral expenses, designated as “payable on death” to the funeral home. Each method has its advantages. To help determine which option is best for you, make sure to ask your Funeral Director the following questions:
      • Who receives the interest on the account?
      • Who must pay taxes on the interest?
      • Is the prepayment ever refundable, in part or in full?
      • Can the plan be used at a funeral home of your choice?
      • What happens if the funeral home goes out of business or is sold?
      • In the event that you move, is the prefunded plan transferable?

      Copyright, National Funeral Directors Association.

Resources for Consumer Articles and Pages:

  1. Colorado Mortuary Science Code, CRC 12-54-101 to 109
  2. International Cemetery, Cremation and Funeral Association, ICCFA.
  3. Cremation Association of North America, CANA.
  4. National Funeral Directors Association, NFDA.

Colorado Funeral Directors Association,  P O Box 631664, Highlands Ranch, CO 80163-1664 U.S.A. 

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