By: Michelle Morgan
We can probably all agree that funeral service has changed dramatically in the past few years. Consumer preferences, changing values, cremation rates, and price sensitive families have all caused a decline in the average at-need sale. That is why many funeral homes are looking for ways to remain cash flow positive in these changing times. Over the years, I’ve worked with hundreds of funeral homes to help them increase their profitability and cash flow with a few simple principles, and I thought it was time to share these keys to success with you! Here are the top five mistakes you can’t afford to make when it comes to your cash flow and my tips for increasing your profitability with your next at-need call.
Mistake #1: Not offering life insurance assignments up-front.
For many families who come into the arrangement conference, the question that is first and foremost in their minds is, “How much is this going to cost?” and maybe more importantly, “How am I going to pay for this?” In speaking with funeral homes across the nation, we have found that those who explain the option of life insurance assignment to their families up-front see an increase of approximately 30% on their at-need contracts. This method has been tested on both large and small firms, all with the same results. That is because offering life insurance assignments puts the family at ease knowing that they can pay for the service that they want, without cutting corners. In essence, families can make decisions based on the proceeds of the policy rather than the balance in their checking account. The best part? Taking advance payment on your life insurance assignments lowers your accounts receivables. You get paid for your services in a timely manner, and the family gets to honor their loved one the way they want to. Now, that’s a win-win! If you have not already, it is time to start offering life insurance assignments to your families before you begin the planning process, not after.
Mistake #2: Doing assignments in-house.
Many funeral homes are still making the mistake of processing their own life insurance assignments in-house. This mistake could cost you more than you even realize. Life insurance assignments create more work for the funeral home, tie up your staff’s time, and can dramatically affect your cash flow, delaying payment for services for 6 to 8 weeks or more. In addition, every insurance company has its own requirements, and often make changes to claim forms, meaning that your payment will be delayed even further. Any delay with death certificates, a pending coroner’s case, or new at-need families coming through your door means that assignments can sit on your desk unattended for months. It just doesn’t have to be that way. Assignment companies can fund within a few days and then handle all the changing requirements and requests from the insurance company, at no cost to the funeral home. Doing your assignments in-house can stall out your cash flow and inflate your accounts receivables very quickly, especially if you get busy. It just doesn’t make sense to tie up your own time or your staff’s time when you could be using that time to enhance your service to families.
Mistake #3: Taking on too much risk.
Life insurance assignments can be risky to take on because there is always the chance that the claim could be denied. And then you’re left holding the bag or have to go back to the family to request an alternate form of payment. No, thank you! To minimize your risk when accepting insurance assignments, you can work with an advance funding company that guarantees their verification of a policy’s benefits. Be sure to check the fine print, here! Not all funding companies are created equal. Some will seek repayment of advanced funds plus interest if the claim ends up being denied. As long as you are working with a company that guarantees their own verification process and offers 100% risk-free advanced funds, you know that when you take an assignment, it won’t come back to bite you. Do yourself a favor, and make sure that your assignment company is providing this crucial service guarantee.
Mistake #4: Missing the red flags.
When an insurance assignment is not something you deal with on a regular basis, you can miss the red flags. Did you know that some policies have exclusions for a death caused by a pandemic? Are there loans or liens against a policy? If you miss this red flag, there may be nothing available to pay out from the policy. Is a policy assignable? This is another red flag that if missed, can leave you with an unpaid contract. Is the beneficiary contestable? Often, policies are not updated after divorce or death. Or the beneficiary could be a trust or a minor. All of these are red flags that most funeral directors don’t see coming, which can become costly mistakes for the funeral home. However, an insurance assignment company has expertise in all types of policies because they handle thousands of cases per year, and they know exactly what to look for and what to ask when verifying the policy benefits.
Mistake #5: Leaving money on the table.
Many funeral homes miss out on the opportunity to grow the future of their business with each life insurance assignment. They are essentially leaving money on the table! How? Well, depending on the insurance assignment partner you use, you have the option to offer your families advanced payment on a portion or all the remaining policy benefits. This is the perfect opportunity to discuss prearrangements. With money in hand, many families are willing to plan ahead and alleviate the burdens on their loved ones, so those decisions are not left for others in the future. So, life insurance assignments can not only help you increase your at-need contract size by an average of 30%, they can also help you grow your preneed block of business and further secure the future of your funeral home. Finally, life insurance assignments also provide a seamless experience for families, and that means they are more likely to return and recommend you to their friends and extended family members in their time of need.
In today’s rapidly changing marketplace, these are five mistakes you just can’t afford to make. I encourage you to do your due diligence. Find out if you are taking on extra risk with your current assignment company. Really look at your accounts receivable and see how much of that balance could be taken care of with one phone call to a reputable advance funding company. Overall, working with a company you can trust will improve your cash flow, put more time into your day, and give you more time to dedicate to the families you serve. By following these simple principles, you will be on your way to a healthier business, less stress, and better work-life balance for you and your staff. FBA
Michelle Morgan serves as Director of Business Services for CLAIMCHECK, a life insurance assignment funding company. Michelle has worked with funeral homes across the nation to help them save time, increase their cash flow, and improve profitability by making good decisions with their life insurance assignment programs. Michelle attended Texas A&M University – Commerce with a dual focus in Animal Science and Business Management.