Ala. Admin. Code r. 482-3-003-.06

Current through Register Vol. 43, No. 1, October 31, 2024

Section 482-3-003-.06 - Preneed Contract - Minimum Requirements - Funeral Providers

(1) On or after January 1, 2015, a preneed contract for funeral merchandise and services must have, at a minimum, the following required disclosures:

(a) A thirty (30) day refund provision in the event of a cancellation. In the event of a cancellation prior to thirty (30) days the purchaser shall be entitled to a complete refund of the amount paid. In the event of a cancellation after the expiration of the thirty (30) days, the seller shall be entitled to a cancellation fee not to exceed twenty percent (20%) of the purchase price collected, and the balance of payments exceeding twenty percent (20%) shall be refunded to purchaser. If the contract is funded by life insurance or an annuity, any cancellation after thirty (30) days will entitle the purchaser to be paid the cash value of the life insurance policy or annuity contract or other refunds per the terms of the policy unless the purchaser elects to maintain the life insurance policy or annuity contract by continuing payment of premiums to the issuing insurance company.

(b) An acknowledgement from the purchaser that purchaser has reviewed a current general price list, casket price list, and outer burial container price list prior to signing the contract.

(c) A disclosure as to which method of funding the seller is using to fund the preneed contract. Regardless of the method of preneed contract funding, the disclosure should include language to the effect that if the purchaser has not completed all required payments according to the contract terms when the contract becomes at need then the difference between the preneed contract price and the funds available is due and payable to the provider. In the event that individual or group life insurance funding is being used as an alternative to a trust, the disclosure must comply with the provisions of Rule 482-3-004-.11. In the event that the trustee is purchasing life insurance on the contract purchaser or beneficiary, written consent must be made through a document separate from the preneed contract under Rule 482-3-004-.12.

(d) An explanation that an "irrevocable option" provision in the contract, when signed by the purchaser, is used when the purchaser is a recipient of or is seeking to qualify for public assistance for such programs as Medicaid and Supplemental Security Income. The purchaser must acknowledge that the purchaser is aware that the contract is revocable unless and until the "irrevocable option" is signed. The purchaser must further acknowledge that an "irrevocable option" is not required to be signed in order to execute the contract.

(e) In the event the contract contains a transfer provision, the seller shall be entitled to a reasonable fee for a transfer. The "reasonable fee" shall be no more than the cancellation fee allowed under (a) of this subsection.

(f) An acknowledgment by purchaser that cash advance item(s) not guaranteed at the listed contract price are clearly denoted as subject to change and the difference is due, if any, at the time of contract fulfillment.

(g) Provision in the event of a purchaser default. After ninety (90) days or more past due, seller must give thirty (30) days written notice to purchaser to cure any default. At the expiration of thirty (30) days, seller shall be entitled to cancel the contract and withdraw funds in trust. The seller shall refund to purchaser the amount collected less a"reasonable fee" of no more than the cancellation fee under (a) of this subsection.

(h) Breach of contract provision where the purchaser shall be entitled to a refund of 100 percent of all money paid on the contract in the event of a breach of contract by the seller.

(i) If the seller's practice is to install vaults or outer burial containers before need, the additional provisions described in Rule 482-3-003-.08.

(j) If merchandise and services are to be provided as complimentary or free of charge, such merchandise and services must be itemized on the preneed contract and noted as "no charge."

(2) Preneed contracts shall be sequentially numbered in a uniform manner. Should pre-printed contracts be used which result in numerical gaps, contracts should be numbered sequentially using an internal numbering system.

Ala. Admin. Code r. 482-3-003-.06

Adopted by Alabama Administrative Monthly Volume XXXIII, Issue No. 02, November 26, 2014, eff. 1/1/2015.

Author: Commissioner of Insurance

Statutory Authority:Code of Ala. 1975, §§ 27-2-17, 27-17A-1 to -57 (2014).