You're absolutely right, Scott! I work for Lincoln Heritage Life and they do have a separate division from their Preneed, and have agents selling FE and
LTC and Med Supps.
I went to Columbian's website and they're not even in Michigan, so I'm wondering why they sent that post card to sell for them.
To answer your question on why it's illegal in Michigan, it has to do with the licensing and Michigan law. It is considered a conflict of interest to work for a funeral home and sell insurance, so they limit the license and cap the amount that can be sold in an insurance policy. Anything over that cap goes into a Trust contract. The reason for the capping has more to do with the Michigan Funeral Directors Association. They own Trust companies so they lobby in Lansing to the Commissioner to cap the insurance amount so more Trusts will be used. Pretty shady, eh? It's all tied into the Medicaid caps, etc.
Preneed products are different from FE, they have different benefits and you're right that someone could be misled into thinking their FE product will cover their funeral costs. The preneed insurance locks the cost of the funeral in so it doesn't increase, is medicaid protected, where FE is not. Funerals double in cost every seven to ten years, so if the interest accrued on the policy doesn't keep up with the inflation, the risk falls on the funeral home, NOT the customer, we just eat it. If the interest does keep up with inflation and there is interest left over in the policy we give it back to the customer. Also, Medicaid has certain criteria for funeral expenses. It must be on a guaranteed contract (meaning it's locked in and won't increase in price), it must be made irrevocable. FE policies can't lock in the funeral cost nor are they on a guaranteed contract that shows the goods and services itemized out on that contract. So basically you can TELL a client that an FE is going to pay for their funeral, but in actuality, it's just another life insurance policy that can cover anything they want it to. It doesn't do anything for the client and probably won't cover their funeral cost when they need it to. They are then opting for a less expensive funeral option so their FE will cover it, even if it's not what the had originally planned or wanted.
I don't know what other states allow. Gotta love Michigan!
Sandi
Columbian Mutual Life Insurance Co
What % are they paying now? I worked with them in the early 90's but back then they had a debit mentality and my sales manager was the hammer and I was the nail. No fun. Hopefully things have changed.
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