The demise of CAP was caused by a number of factors, the most significant of which were the deregulation of fees for private colleges and universities in 1992, the Asian financial crisis of 1997, and the implementation of new rules that assessed the value of CAP’s finances and found it to be severely lacking, all of which eventually led to the company’s demise.
Is cap an insurance company?
CAP General Insurance Corporation (CAPGEN), a non-life insurance firm, is distinct from College Assurance Plan, Inc. (CAP-EDU) and the Comprehensive Annuity Plans and Pension Corporation (CAP-Pension).
What is a cap in insurance?
The entire benefit amount that an insurance plan will pay out. The plan will no longer provide coverage after a patient’s medical expenditures surpass the amount, or cap.
What is a payment cap in healthcare?
While you’re registered in a specific health insurance plan, your insurance company will pay a maximum amount of benefits in a given year. Caps for specific services, such as prescriptions or hospitalizations, are sometimes imposed. Annual limits on the cash amount of covered services or the number of visits covered for a certain service may be imposed. You must pay all linked health-care costs for the rest of the year after an annual limit is reached.
What is preneed funeral?
Some people prepare for their own funerals and burials by researching pricing, talking with family about their plans or leaving instructions, or choosing funeral and burial items and services that do not need payment in advance. Some people may even preplan by putting money aside in a bank account for the appropriate survivor to purchase funeral and burial items and services in the future.
Individuals prepay for funerals and burials by signing into a preneed agreement, or contract, which allows them to pay for products or services in advance of their death. In most cases, this is a contract between the individual and the funeral director or cemeterian, and it is supported by a funeral trust, annuity, or insurance policy. A third party – generally a trustee or insurance company – acquires responsibility for the money’ management at the time of the arrangement. As a result, the individual frequently loses access to cash after signing the agreement, and can only regain access to the funds by terminating the arrangement. The monies are utilized by a representative of the funeral home or cemetery to offer the specified goods and services after the individual dies.
Trends in the Industries
Funeral directors used to supply funeral goods and services, while cemeterians handled burial goods and services. Funeral directors are increasingly providing goods and services that were previously only available from cemeteries, and cemeteries are increasingly selling items that were previously only available from the funeral business.
Preneed agreements used to commonly exclusively contain burial sites and were therefore primarily offered by cemeteries. Funeral directors and cemeteries may now sell a package of both funeral and burial goods and services as part of preneed agreements.
Local funeral homes and cemeteries are increasingly being purchased by large corporations.
Approximately 30% of the country’s funeral business is currently handled by major commercial corporations. Preneed agreements are actively marketed and sold by these huge chains.
Preneed agreements are increasingly being sold by third-party sellers. Persons who have traditionally marketed caskets, headstones, and other funeral and burial materials are known as third-party sellers. While third-party sellers are not funeral directors or cemeterians, they are subject to the same preneed agreement restrictions as licensed funeral homes and cemeteries in jurisdictions that allow third-party sellers to sell preneed agreements.
The funds from preneed agreements are kept in a number of places. Figure 1 reveals that 30 percent of those who had pre-paid for funerals had monies in trust and another 30 percent had funds in life insurance plans.
The location of respondents’ prepaid cemetery funds is depicted in Figure 2. Sixty percent of those who had pre-paid for burials said they owned a cemetery plot, while 15% said they had money in a life insurance policy.
Regulation of Preneed Agreements
It’s more difficult to regulate the sale of preneed funeral and burial agreements than it is to regulate the sale of many other types of consumer goods. The period between signing the agreement and the need for the products and services stated in the agreement is a major difficulty with preneed agreements. If trust funds are mistreated after the agreement is signed, for example, the mismanagement may go undiscovered for years. Furthermore, because the individual who signed the contract is deceased, it is often impossible to ascertain whether specific conditions of the contract were carried out (for example, the type of coffin).
There is no federal legislation that directly addresses the marketing of preneed agreements, including the FTC’s Funeral Rule (see page 4). The preneed sector is governed by a patchwork of state rules and regulations that differ from one state to the next. Furthermore, many cemeteries are excluded from governmental jurisdiction, such as religious and municipal cemeteries.
In general, state regulations have addressed: 1) preneed products and services seller licensure, 2) funds in trust requirements, 3) contract clauses and cancellation requirements, and 4) consumer protection recovery funds. The scope, approach, and requirements of these regulations differ.
Except for Alabama, every state has a legislation that governs the selling of preneed funeral and burial contracts. Twenty-four states have a single statute that includes both funeral and burial contracts, 11 states have distinct preneed funeral and burial contracts, and 14 states have a single statute that solely covers preneed funeral contracts. The law governs commodities and/or services, depending on the jurisdiction of the state statute.
Who can offer preneed contracts (funeral home or cemetery salespeople, or third-party sellers) and whether a separate preneed license or permit is required vary by state. Some states require the vendor of a preneed contract to be a licensed insurance agent if the contract is paid with an insurance product. State unfair and deceptive acts and practices (UDAP) statutes only apply to the selling of preneed agreements in five states.
The amount of money that funeral directors are obligated to deposit into trust from individual preneed funeral agreements varies by state. In most states, at least 90% of the earnings from the sale of funeral preneed agreements must be deposited in trust. Some states do not have this requirement. Other states have minimum standards ranging from 40% to 100%.
Funding amounts range from 30 percent to 100 percent in states that mandate payment for preneed cemetery agreements. In more than 30 jurisdictions, the seller must hold 75 percent or less of the earnings from a preneed cemetery agreement in trust.
The form and content of preneed contracts are regulated differently by state preneed laws. Some states just require that the contract be written and include the parties’ names and the agreement’s conditions. Other states have special requirements for standard disclosures, clear language, and large type.
The procedures for canceling a preneed funeral or burial contract, as well as the amount of money returned to the purchaser upon cancellation, differ from state to state. Only a small number of states need a particular notice of the buyer’s right to cancel in the preneed contract. Individuals who move, decide to use a different funeral home or cemetery, or want to cancel their agreement may not be able to do so without incurring a penalty. Individuals may lose a considerable amount of money in various instances.
States create recovery funds to make monies available to customers who have been cheated or have experienced a breach of contract. A consumer protection recovery fund for preneed funeral and/or burial agreements is currently provided by eight state statutes. Sellers of preneed agreements are normally required to pay a charge for each agreement sold in states that have established recovery funds, with the price based on the contract’s value. When a seller who has breached the preneed contract has insufficient finances to give a refund, the fees placed in the recovery fund are used to pay a preneed buyer.
Case Study
While it is well acknowledged that the number of preneed agreements is fast increasing, detailed national statistics is lacking. States may collect statistics on preneed agreements sales, but the amount, type, and accessibility of the data varies greatly. Washington’s experience provides vital insight into the preneed funeral and burial sectors because the state has gathered and reviewed data that tracks the industry’s growth. Figure 3 depicts the huge increase in the amount of money put into preneed funeral trust funds by Washington citizens in recent years. Between 1988 and 1997, this value increased by 155 percent, and it is now believed to be worth more than $70 million.
Similarly, during the same time period, the amount of money prepaid for cemetery goods and services in Washington increased dramatically. Figure 4 demonstrates that between 1988 and 1997, funds in preneed cemetery agreements climbed by 158 percent. In Washington, roughly $35 million is now held in cemetery trust funds.
FTC’s Funeral Rule
Consumers are entitled to price information about funeral goods and services, according to the Federal Trade Commission’s (FTC) Funeral Rule, whether they inquire by phone or in person. Individuals are required to get a general price list (GPL) from funeral homes that can be used for comparison shopping.
The Rule does not apply to cemeteries or third-party retailers because it only applies to people who provide both funeral goods and services. Furthermore, trust funds formed through the sale of preneed funeral and burial agreements are not covered by the Rule. Furthermore, there are no federal minimum standards for preneed funeral and burial contracts, and no federal need for full disclosure of preneed contract terms and conditions, as well as the risks customers face if they cancel a contract.
Footnotes
- Preneed Perspective, Vol 5, Issue 11, Nov 1998, Committee on Aging Sics GAO on Preneed.
- A typical funeral involves both goods and services (caskets and outside burial containers) (services of the funeral director, care of the body, transportation, use of facilities, and alternative arrangements). Typically, both objects (markers) and services are included in a burial (opening and closing of the grave and perpetual care).
- L. Carlson (1998). Your Last Act of Love: Caring for the Dead Upper Access, Hinesburg, VT.
- J. Frank (1996). The Case for Uniformity in Preneed Funeral Plans Spring 1996, Elder Law Journal.
- Despite the fact that cemeteries are increasingly offering many of the same goods and services as funeral homes, different regulatory rules for funeral businesses and cemeteries still exist.
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What is the difference between life and burial insurance?
Many people purchase life insurance to pay for their funeral expenditures. According to the 2020 Life Insurance Barometer report from industry-funded groups LIMRA and Life Happens, 84 percent of life insurance policyholders mention last expenses as a reason for purchasing life insurance.
Burial insurance is a sort of life insurance that covers final expenses only. It’s also known as final expenditure insurance or funeral insurance.
Burial insurance is basically a complete life insurance coverage issued in modest increments, ranging from $5,000 to $25,000. These policies aren’t designed for those who are starting a family and require life insurance to cover larger expenses like a mortgage, college tuition for their children, and income replacement throughout their peak working years.
The sole reason many older people acquire life insurance is to cover the cost of a funeral. Burial insurance for seniors is frequently sold to seniors who are on a tight budget and, in some cases, in bad health, and who lack the assets or other life insurance that a family could use to cover funeral expenses.
What is no cap in insurance?
In health insurance, there is no maximum room rent limit, so you can choose any room in the hospital for your treatment. Simply said, if the total claim amount is up to the sum insured, you can receive treatment, including ICU if necessary, in any hospital room.