What is required for funding preneed contracts with insurance?

Funding preneed contracts with insurance involves ensuring that the policy serves its intended purpose, which is to secure funds for future funeral services. When a policy is irrevocably assigned to a trustee, it means that the ownership and control of the policy are transferred in such a way that the original owner cannot reclaim it or change its terms. This arrangement provides security for the funds intended for the preneed contract because it ensures that the money is set aside specifically for that purpose and cannot be accessed for other uses by the policy owner.

Such a setup is crucial in the context of preneed contracts because it protects both the funeral provider and the consumer. It guarantees that the funds will be available when needed, and it prevents potential misuse of the policy, thereby ensuring that the funds are strictly allocated for funeral expenses.

The other options do not adequately secure the intended purpose of the funding. For instance, borrowing against the policy or retaining control of the cash value could jeopardize the availability of those funds at the time of need, while the seller's ability to change beneficiaries does not provide the same level of assurance that the funds will be applied correctly or that the consumer's interests are protected. Hence, assigning the policy irrevocably to a trustee is the requirement