This article provides a clear understanding of pre-need sales for funeral homes, a key component of this business. Pre-need sales involve customers purchasing funeral services ahead of time, offering financial and emotional relief to families. These contracts can significantly impact the financial stability of a funeral home.
Pre-need sales are crucial for funeral homes to secure future revenue and offer clients peace of mind. This model has become increasingly important due to the financial benefits it provides for both funeral homes and their customers. Here’s a breakdown of essential insights into pre-need funeral contracts.
You’ll find detailed market insights in our funeral home business plan, updated every quarter.
Pre-need sales are a significant part of a funeral home’s business model. This section summarizes key metrics such as the total value of pre-need contracts, average contract values, and the revenue mix between pre-need and at-need services.
| Metric | Details | Source |
|---|---|---|
| Total Value of Pre-Need Contracts | $2.9 billion in 2023 | Limra |
| Number of Pre-Need Contracts | 517,000 contracts in 2023 | Limra |
| Average Contract Value | $5,352 (single-premium) to $6,618 (core funeral services) | SCI |
| Pre-Need Revenue Share | 25%-50% of total revenue | Johnson Consulting |
| Common Products in Pre-Need Contracts | Funeral services, caskets, urns, burial vaults | Foresight Companies |
| Age of Pre-Need Customers | 67-74 years old | Funeral Director Daily |
| Cancellation Rate | 6%-10% average | SEC |
What is the current total value of pre-need contracts sold in the last 12 months?
The total value of pre-need contracts sold in 2023 was estimated at $2.9 billion. This reflects the significant role that pre-need sales play in the funeral industry.
How many pre-need contracts were written during that same period, and what is the average contract value?
Over 517,000 pre-need contracts were written in 2023. The average contract value ranged from $5,352 for single-premium plans to $6,618 for core funeral services.
What percentage of overall funeral home revenue comes from pre-need sales compared with at-need sales?
Pre-need sales typically represent between 25%-50% of a funeral home's total revenue. This percentage varies based on market maturity and the funeral home's business approach.
What are the most common products or services included in pre-need contracts, and how do these affect margins?
Pre-need contracts often include basic funeral services, caskets, urns, and burial vaults. Products like caskets have higher margins compared to services or cremation-only contracts.
What is the average age and demographic profile of pre-need customers, and how does that influence sales strategy?
Pre-need customers are typically between 67 and 74 years old. Many are married couples planning ahead for their families. Sales strategies focus on education, price-locking benefits, and easing the decision burden for their children.
What channels or marketing methods generate the highest volume of pre-need leads and conversions?
The most effective marketing channels include community seminars, direct mail, digital ads, and insurance/estate planning agent partnerships. These channels generate high-quality leads.
What is the close rate from initial consultation to signed pre-need contract, and how has this trended over time?
The close rate typically ranges between 25%-40%, with some top-performing sales teams reaching higher conversion rates due to effective community outreach and digital engagement strategies.
What percentage of pre-need contracts are financed versus paid in full, and what are the average terms?
57% of pre-need contracts are paid as single premiums, while 40% are multi-pay contracts, often on 36-month terms. A small percentage (3%) are financed through annuities.
What is the cancellation or lapse rate on pre-need contracts, and what financial impact does this have?
The cancellation or lapse rate for pre-need contracts is generally between 6%-10%. This rate results in lost revenue and potential chargebacks on commissions and marketing investments.
What role do third-party insurance or trust funding vehicles play in the pre-need sales portfolio?
Third-party insurance and trust funding are critical for managing regulatory compliance and protecting consumers. They allow funeral homes to offer secure financial planning options for their clients.
What compliance and regulatory requirements apply to pre-need sales in this jurisdiction, and how are they managed?
Pre-need sales must comply with funeral law, the FTC Funeral Rule, and insurance regulations. Funeral homes must maintain proper records, conduct audits, and ensure transparent pricing and disclosures.
What growth rate in pre-need sales has been observed year-over-year, and what projections are in place for the next three to five years?
Pre-need sales have experienced steady growth of 4%-8% annually. Projections for the next 3-5 years suggest continued positive growth due to demographic trends and increased consumer education.
Conclusion
This article is for informational purposes only and should not be considered financial advice. Readers are encouraged to consult with a qualified professional before making any investment decisions. We accept no liability for any actions taken based on the information provided.
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