In our prior post we discussed two factors to preneed shortfalls: investment returns and the operator’s performance cost increases.  The Funeral Consumer Alliance of Greater Kansas City conducts an annual survey of the region’s funeral homes to track the price increases on their General Price Lists.  A couple days after our post, the Kansas City Star published a story on the FCA’s survey.  According to the survey, funeral prices rose at 4%, while cremation service prices rose about 3.6%.  The survey found the average cost of a funeral in the Kansas City region is $6,623.  If funeral costs were to continue to rise at that same 4% rate, the average funeral cost in 2024 will be about $9,800 (which does not include the costs of a grave space, marker and interment service).

One insurance company marketing against preneed shortfalls offers two bump options of 9% and 16%.   These ‘bumps’ are a percentage of the current General Price List costs.  So for an average funeral in Kansas City, the bump options would be $596 or $1,060.  This particular insurance company advertises a policy annual increase of 1.8%.  Using the higher bump, the life insurance death benefit in 2024 would be $9,184.  Under these assumptions, the Kansas City funeral home would still have a shortfall of  about $600.  The funeral home would have to charge a bump of 24% (or $1,590) in order to avoid a shortfall on an insurance policy paying 1.8%.  The consumer would be required to pay $8,213 for that average funeral of $6,623.