FOOL'S SCHOOL DAILY Q&A
Think Twice About Funeral Insurance

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By Selena Maranjian (TMF Selena)
January 8, 2002

Q. Do you recommend "pre-need" funeral insurance?

A. Most of us can probably do without it. Pre-need arrangements are typically made with mortuaries, cemeteries, and/or insurance companies, and more and more people are making them. The benefit of such plans is that when you move on to the great beyond, your loved ones won't have many arrangements to make. They'll be able to focus mainly on mourning, because plots will have been chosen and paid for, as will the funeral and burial. That's all very good.

The downside, and a reason to think twice before plunking down pre-need money, is that it tends to be a lot of money. And that pile of money will be out of your hands and earning interest... for the people you paid. Let's say you're 75 and you pay $5,000 for a cemetery plot and $10,000 to a funeral home to cover your casket and various services. That's well and good, but what if you're blessed and live another 20 years? You've lost the benefit of that $15,000 for a long time. If you'd invested it and earned 10% per year on it, you'd have $101,000! That would probably be enough to cover death expenses and would leave some shekels to your loved ones, as well. Another consideration is that you might actually need that $15,000 at some point before you die.

In an informative article, Nancy Dunnan warns us to be careful because:

  • Pre-need plans are often nonrefundable.
  • Plans are often nontransferable, meaning you cannot change your mind or switch mortuaries.
  • Plans often have hidden fees, meaning your survivors could wind up paying even more when you die.
  • Plans can be mishandled.

Click into the article above for more details. Also useful are these sites: Funeral Consumers Alliance, Profits of Death, and the long but informative Funerals and Ripoffs.

If you wish you had a financial pro to talk to about end-of-life financial issues as well as a host of other money concerns, we can help. Financial pros can address your specific situation and help ensure that you're saving enough and well enough to meet all your needs. Learn more about TMF Money Advisor. It's a valuable new service we're offering, featuring customized independent advice from a variety of objective financial pros.

This question and answer is adapted from The Motley Fool Money Guide: Answers to Your Questions About Saving, Spending and Investing. For answers to this and 499 other common money questions, check it out -- it's a handy resource.

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Reader Responses to Previous Q&As

How About Stock Bashing?

As you are obviously aware, the practice [of pumping and dumping] is fairly common. It is also fairly easy to spot and well understood. What I'd love to see is some work by the press on the subject of bashing. The theory is that short interests bash stocks on anonymous message boards to drive the price down or at least limit moves up.

I have been active on the Level 3 Communications (Nasdaq: LVLT) board for some time now. Current short interest is 58 million shares and the board is all but overrun with bashers. Over time it becomes obvious that many of the IDs are the same individuals. They put in enormous effort posting night and day, weekends and holidays. Patterns are visible: They tend not to fight obvious uptrends, but they pounce on any downward move. They tend to be active just prior to open and close. They use predictable strategies such as personal attacks on any individuals that add value to the board, multiple IDs to recommend bashes, and occasional forays to hot political topics that distract the board at crucial moments.

In short, the argument that bashers are teenagers that come by for a little negative attention does not hold water. The occasional disgruntled ex-employee is equally easy to spot. However, the majority of Level 3 bashers appear to be well organized with lots of computer resources and time, nothing like the stereotypes described above.

Consider that if over a year a bashing effort resulted in Level 3's price being $0.10 lower than it would otherwise have been, that would amount to nearly $6 million in value to the total short interest. A $1.00 difference is also plausible, given the volatility of this stock. -- Nick Byrnes