Building a preneed program buyers value (and funding it correctly)

The largest operator in the industry treats preneed as stored-up market share. SCI’s fiscal 2025 annual report shows a preneed backlog of $17.0 billion at December 31, 2025, funded by a mix of trusts and insurance. A family firm does not need that scale to benefit. It does need a program that a buyer’s accountant can test and find whole.

This guide covers the operating side: who sells, how contracts are funded, what each file must contain, and the numbers buyers check. What happens to preneed during a sale is covered in our guide to preneed when selling a funeral home.

What makes a preneed program valuable to a buyer?

Three things: every contract is funded as state law requires, guaranteed contracts are priced so funding keeps pace with costs, and records tie to outside statements. A program meeting all three adds future calls; one missing any of them adds a liability.

Buyers think about preneed as two separate assets. The first is the funded value they will receive when each contract matures. The second is the relationship: families who prearranged with you are likely to call you when the time comes. Both are worth something only if the paperwork proves it.

Who should sell preneed at your funeral home?

Choose the model your state’s licensing rules allow and your staff can sustain: funeral directors selling alongside at-need work, a dedicated preneed counselor, or an insurer-affiliated agent. Each changes cost, control, and licensing.

The licensing layer varies sharply. Under Texas Finance Code chapter 154, the seller needs a Department of Banking permit, and premiums for insurance-funded contracts may be collected only by a licensed agent appointed by the insurer. Florida requires preneed sales agents to be licensed, with an exception for funeral directors selling for their affiliated licensee.

Whatever the model, write down how contracts are presented. A short script, a standard set of disclosures, and a rule that no one promises anything outside the contract protect families and protect value. Buyers read a sample of files to see whether different sellers made different promises. They also ask who supervises outside agents, because a promise an agent made in your name is still yours to keep. Commission plans should reward funded, completed contracts, not signatures alone, so production does not outrun funding.

Should you fund preneed with a trust or with insurance?

Use the vehicle that fits your state’s rules and your tolerance for investment risk. Insurance shifts growth and investment risk to the insurer and usually pays a commission; a trust keeps the money under your trustee’s management and keeps the shortfall risk with you.

Sources: Florida § 497.458, Michigan MCL 328.222, Texas chapter 154, and Kentucky KRS 367.935.

Insurance terms deserve the same attention as trust rules. SCI’s 10-K notes that in July 2024 it changed its preferred U.S. preneed insurer and that 2025 general agency revenue grew partly on higher commission rates. If insurance carries your program, compare growth crediting, commission schedules, and chargeback terms across insurers every few years. Managing an existing trust is a separate skill; see preneed trust investments and fees.

Should contracts guarantee prices?

Guarantees sell well, but each one is a promise to deliver later at today’s price. Guarantee what you control, and price and fund those items so expected growth keeps up with your expected price increases.

Your General Price List drives this math, because guaranteed contracts are re-priced against it at maturity. A pricing review like the one in pricing your GPL against the market should include a check on what a price change does to the gap on existing guaranteed contracts.

What should every preneed contract file contain?

Each file should let an outsider confirm what was promised, what was paid, where the money went, and what the purchaser may change. The FTC’s consumer guide to planning your own funeral tells families to ask “What happens to the money you’ve prepaid?” Your file should answer that in one glance.

Which compliance tasks keep a program clean?

Deposit on time, file required reports, follow investment rules, and keep the trust agreement current with your regulator. Most findings in a buyer’s review trace back to one of those four.

Deadlines are specific. Texas requires deposit within 30 days. Florida’s deadline is 30 days after the end of the month in which payment is received, and its statute bars trusts from holding life insurance or annuities. Texas applies the prudent investor standard and requires a written investment plan filed with the annual report. Put each deadline on a compliance calendar, and keep deposit evidence in the contract file rather than only in the bank statement.

Bookkeeping matters too. Preneed receipts are not revenue when collected, and commingling them with operating cash causes most of the problems buyers find. Our guide to funeral home accounting setup shows how to book them.

Which preneed metrics do buyers check?

Buyers check whether the register is complete, whether funding covers today’s cost to deliver, and whether contracts turn into calls. Track these each year so the answers are ready.

1. Funding ratio. Funded value ÷ current cost to deliver every guaranteed obligation. It is the fourth number in The Four-Number Funeral Home Valuation Screen.
2. Maturity rate. Preneed contracts serviced ÷ total calls in the year. It shows how much of the business arrives already arranged.
3. Cancellation and transfer-out rate. Contracts cancelled or moved to another provider ÷ contracts outstanding. A rising rate suggests service or pricing problems.
4. Production. New contracts written per year compared with at-need calls, so buyers can see whether the backlog is growing or aging.
5. Last full reconciliation date. When the register was last tied to trustee and insurer statements.

The Preneed Reconciliation Ladder is the yearly routine behind those numbers: register completeness, match to funding, verify funding values, re-price obligations, and compute the gap. Firms that climb it every year rarely face a surprise in diligence. For the other operating levers that move value, see the operations hub.