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  • Producers/Agents


  • Companies


Preneed Funeral and Cemetery Act

effective May 1, 2002

Contact: Robert Turner, Acting Supervisor

(334) 241-4190

4/2/2002

[Notice revised April 25, 2002]
The Alabama Preneed Funeral and Cemetery Act, Ala. Act No. 2002-74, becomes effective May 1, 2002. To view a “PDF” copy of the law, please click below:
Ala. Act No. 2002-74 (House Bill 53, 2002 Regular Session)
According to the terms of this law, persons selling a "preneed" contract for funeral services, funeral merchandise, cemetery services, and cemetery services on and after May 1, 2002, must first obtain a certificate of authority from the Commissioner of Insurance. All individuals who offer preneed contracts to the public or who execute contracts on behalf of a certificate holder must be registered with the Commissioner as Preneed Sales Agents.
The Commissioner of Insurance mailed a packet of information and forms to each person currently registered with the Alabama Board of Funeral Services the first week of April. A packet of information and forms was also mailed to all known cemetery authorities. The following documents are currently available from the Department of Insurance:
  • Filing Instructions - Word - PDF
  • Narrative Summary of the Preneed Law - Word - PDF
  • Application for Certificate of Authority - Word - PDF
  • Application for Branch Registration - Word - PDF
  • Preneed Sales Agent Registration Form - Word - PDF
  • Contract for Funeral Merchandise and Services - Word - PDF
  • Contract for Cemetery Merchandise and Services - Word - PDF
  • Stand Alone Trust Agreement – Funeral Merchandise and Services - Word - PDF
  • Association Trust Agreement – Funeral Merchandise and Services - Word - PDF
  • Stand Alone Trust Agreement – Cemetery Merchandise and Services - Word - PDF
  • Association Trust Agreement – Cemetery Merchandise and Services - Word - PDF
  • Surety Bond - Word - PDF
  • Endowment Care Cemetery Trust - Word - PDF
  • Letter of Credit - Word - PDF

Frequently Asked Questions

Q:

Who must obtain a certificate of authority?

A:

The Alabama Preneed Funeral and Cemetery Act (the “Act”) defines the term “person” as any individual, firm, corporation, partnership, joint venture, limited liability company, association, trustee, government, governmental subdivision, governmental agency, or other entity or any combination thereof. All “persons” selling funeral or cemetery merchandise or services pursuant to preneed contracts must have a valid certificate of authority.

Q:

Who is eligible to obtain a certificate of authority?

A:

Only a licensed funeral director, licensed funeral establishment, cemetery authority or third party seller may obtain a certificate of authority. Only licensed funeral directors or licensed funeral establishments can sell funeral services preneed. Licensed funeral directors, licensed funeral authorities, cemetery authorities, and third party sellers can sell funeral merchandise and cemetery merchandise preneed.

Q:

When must a preneed sales agent registration form be completed?

A:

The “person” selling preneed will either be an individual (i.e., a sole proprietorship) or some other type of entity. Regardless of which is the case, each preneed certificate holder will be granted one “free” preneed sales agent registration. Even though the preneed certificate holder is entitled to one preneed sales agent registration without paying the $25.00 registration fee, the preneed sales agent must be registered in accordance with the Act, even if the preneed sales agent is the same person as the certificate holder.

Q:

Who can be a trustee?

A:

The Act provides that any “person” can be the trustee of a funeral or cemetery merchandise or services trust. Deposits into a funeral merchandise or services trust must be made within the State of Alabama. Because of the important interests protected by the Act, trusts with corporate trustees (i.e., banks, savings and loan associations, trust companies, or other financial institutions) will be approved relatively quickly by the Commissioner of Insurance (the “Commissioner”). Funeral or cemetery merchandise or services trusts with individual trustees will be examined much more closely by the Commissioner. The submission of funeral or cemetery merchandise or services trust agreements with individual trustees will substantially delay (well beyond the Act’s May 1, 2002 effective date) approval of such trust agreements by the Commissioner. With regard to endowment care cemetery trust funds established by the Act, the trustee must either be a bank, trust company, savings and loan association, other financial institution, or a board of trustees at least three of whom reside within the State of Alabama.

Q:

If a certificate holder chooses to participate in a trust created or sponsored by an association of which it is a member, does that certificate holder need to submit a separate trust document?

A:

No. The trustee of the association trust will submit the association trust document on behalf of all the association’s members. Approval will be given to the master trust agreement. Certificate holders who choose to participate in such trusts must, however, submit to the Commissioner an executed joinder agreement or a participation agreement bearing the name of the sponsoring association.

Q:

Does each licensed funeral director, licensed funeral establishment, cemetery authority, or third party seller owned by the same corporation, partnership or sole proprietor need a separate certificate of authority?

A:

Not in all cases. The Act provides that where a person selling preneed funeral or cemetery merchandise or services is part of a “common business enterprise” and wishes to operate using a different name than that used by the certificate holder, then, if the requirements set forth in the Act are met, that person can be authorized to sell preneed as a “branch registrant”. The Act requires that the branch registrant meet all requirements of a certificate holder EXCEPT that the branch registrant need not demonstrate that, standing alone, it can pay its liabilities as they become due during the ordinary course of business and also need not show that it has sufficient funds available during the calendar year to perform its obligations under outstanding preneed contracts. With regard to the phrase “common business enterprise”, each funeral director, funeral establishment, cemetery authority, or third party seller that is separately incorporated must have its own certificate of authority. If associated entities file a combined Federal income tax return and operate using the same name, only the entity filing the tax return is required to have a certificate of authority. It is important to remember, however, that only licensed funeral directors, licensed funeral establishments, cemetery authorities, and third party sellers can hold certificates of authority. If the entity filing a combined federal income tax return does not qualify as one of these entities, an entity “down the line” will have to be the certificate holder.

Q:

Can a preneed sales agent represent or sell for different funeral directors, funeral establishments, cemetery authorities, third party sellers, or their branch registrants at the same time?

A:

Yes. However, the preneed sales agent must be registered as a preneed sales agent with each certificate holder for whom he or she sells preneed funeral or cemetery contracts.

Q:

The financial information that must be sent with the application must be current as of what date?

A:

For the initial certificate of authority, the Commissioner requests the information be current as of December 31, 2001. For those entities which regularly generate financial statements at the end of their fiscal year and whose fiscal years ended at some time prior to December 31, 2001, the Commissioner will accept financial statements current as of the end of the applicant’s fiscal year provided that the applicant provides updated financial statements at the end of its current fiscal year.

Q:

If an entity operates both a funeral establishment and a cemetery authority, does it need only one certificate of authority and one financial statement?

A:

Yes. The entity will, however, need separate trusts, one for funeral services and merchandise and one for cemetery services and merchandise. If they choose an alternative, they will need two surety bonds or two letters of credit.

Q:

If a certificate holder is using life insurance to fund the preneed contracts, is a trust fund needed?

A:

The trust requirements of the act become effective 30 days after the preneed contract is paid in full. Thus, for purposes of the preneed law, so long as the life insurance policy is purchased prior to the date the trust requirement becomes effective, the trust requirement is avoided. Please note, however, an insurance producer is subject to the requirements of the insurance laws and must remit premium collected in accordance with the insurance company's requirements, which may be less than 30 days.

Q:

Must the financial data filed with the application for the initial certificate of authority be filed on the forms provided by the Insurance Department?

A:

The financial data may be filed on those forms provided by the Insurance Department or on forms that are essentially the same and provide essentially the same information as the forms provided by the Insurance Department.

Q:

Must the financial information required for the issuance of the initial certificate of authority need to be audited?

A:

No. However, every effort should be made to make sure that the financial information provided is a complete and accurate record of the financial status of the proposed certificate holder.

Q:

If an entity uses only life insurance to fund the preneed contracts, does the preneed sales agent need an ordinary life insurance license?

A:

Yes. The preneed sales agent must be licensed as an insurance producer [agent] to sell ordinary life insurance. The preneed sales agent must also be registered as a preneed sales agent in accordance with the Act.

Q:

If an entity satisfies the Act’s security requirements by placing funds paid pursuant to a preneed contract in trust, must the preneed sales agent be registered pursuant to the Act?

A:

Yes.

Q:

If the trustee of a preneed funeral or cemetery merchandise or services trust invests trust funds by purchasing life insurance policies on the life of the preneed purchaser, must the certificate holder have an individual who is licensed as an ordinary life insurance producer [agent] present at preneed sales?

A:

Yes. The law defines “insurance producer” [formerly known as insurance “agent”] as “a person required to be licensed under the laws of the State of Alabama to sell, solicit, or negotiate insurance.” The term “sell” is defined as “to exchange a contract of insurance by any means, for money or its equivalent, on behalf of an insurance company.” The term “solicit” is defined as “attempting to sell insurance or asking or urging a person to apply for a particular kind of insurance from a particular company.” The term “negotiate” is defined as “the act of conferring directly with or offering advice directly to a purchaser or prospective purchaser of a particular contract of insurance concerning any of the substantive benefits, terms, or conditions of the contract, provided that the person engaged in that act either sells insurance or obtains insurance from insurers for purchasers.” Thus, if anyone at the entity is selling, soliciting or negotiating for insurance, that person will need an ordinary life insurance agent’s license.

Q:

If the entity plans to fund the preneed contracts with a surety bond or a letter of credit, can the trust fund language and life insurance language be removed from the first page of the preneed sales contract and the terms “surety bond” or “letter of credit” be substituted?

A:

Yes.

Q:

May the portion of the contract for preneed cemetery merchandise and services dealing with the purchaser be changed to provide for two individuals if two interment rights are being purchased?

A:

Yes. The contract should show two purchasers along with a social security number and address for each purchaser.

Q:

Question 9 on the application for certificate of authority and branch registration forms, as well as the historical sketch of principals forms attached thereto, inquire as to whether the applicant (or principal) have previously been the subject of a bankruptcy proceeding. Does a “Yes” response to this question disqualify the applicant?

A:

No; however, additional information must be provided. If this previous bankruptcy proceeding was in no way associated with the business of insurance or preneed funeral or cemetery business, you may complete the affidavit below in lieu of filing a more detailed explanation.

Bankruptcy Affidavit - Word - PDF

Q:

Can a cemetery existing prior to the act’s effective date cease doing business prior to the effective date and thus avoid the requirements of an endowment care cemetery fund?

A:

Yes. If the cemetery stops charging fees prior to May 1, 2002, the requirements to establish and maintain an endowment care fund do not apply. Please note, however, that the requirements of Section 27-17A-48 to maintain a list of the names and addresses of the owners and also to maintain a record of the property owners will still apply to any owner of a cemetery. Thus, a cemetery authority cannot avoid these requirements by merely ceasing to charge fees but would have to transfer ownership to another entity.

If you have other questions in this regard, please contact Robert Turner, Acting Supervisor, by phone at (334) 241-4190 or by E-Mail at requestlifehealth@insurance.state.al.us