Iowa Preneed Funeral Bond Law Effective July 1

preneed funeral bond

Editor’s Note:  As of December 30, 2015, the statutory preneed funeral bond requirements previously established have been eliminated by the Iowa Department of Insurance via ADC 191-100.23 (523A) .  Initially, the department sought to remove the bond entirely, believing that it was too difficult to obtain and that many funeral homes and service providers opted for other trust fund options. Rather than eliminate the bond, the Department amended the requirement so that the bond must be in an amount based on the value of purchase agreements sold and not performed or canceled, and for which no trust fund or insurance is in place.

The amount of time in which a claim may be made against the bond has been amended as well.  As opposed to the previous limit of 60 days, the new rule allows claims to be made within 1 year following a breach of the bond.  Claims may also be made within 5 years if they pertain to the seller’s insolvency or stoppage of business.


A new law clarifies the surety bond amount required for a preneed funeral bond in Iowa. HF 404 (An Act Relating to Payments for Prepaid Cemetery and Funeral Merchandise, and Funeral Services that are Required to be Placed in Trust or Secured by a Surety Bond) addresses funeral services that utilize surety bonds as way to guarantee contractual fulfillment.

Each client that works with a funeral home can choose one of four options to secure their pre-need funeral funds:

  1. placing the funds in a trust
  2. purchasing an insurance policy
  3. purchasing an annuity
  4. purchasing a surety bond

A preneed funeral bond gives customers peace of mind when they prepay funeral homes and other similar establishments for funeral and burial agreements.  These surety bonds guarantee the provider will use the funds appropriately. A funeral home maintains their preneed funeral bond until they complete contracted services. If the establishment should fail to fulfill its contractual obligation to a client, the bond would reimburse the family for financial losses.

The new law clarifies the exact amount for which pre-need funeral bonds should be issued when used for both guaranteed and non-guaranteed purchase agreements. According to the legislation,

“The amount of the surety bond shall equal eighty percent of the payments received pursuant to guaranteed purchase agreements and one hundred percent of the payments received pursuant to non-guaranteed purchase agreements, or the applicable portion thereof, for cemetery merchandise, funeral merchandise, funeral services, or a combination thereof.”

This change requires surety bonds used for guaranteed purchase agreements to be issued for 80% while those issued for non-guaranteed purchase agreements will be fully covered. This legal stipulation will, potentially, make it easier for customers to recollect almost all financial losses when funeral homes mismanage prepaid funds on certain purchase agreements.

The Iowa Legislature passed the amendment back in March, and Governor Terry Branstad signed it on April 14. The law will go into effect July 1.

The Securities & Regulated Industries Bureau, which is maintained by the Iowa Insurance Division, enforces regulations related to prearranged funeral plans in the state.

About the Author

Jon Gottschalk
Jon Gottschalk is the Educational Outreach Director for Suretybonds.com and regularly blogs at the Surety Bond Insider to keep consumers informed on new legislation and updates in the commercial surety industry. He is also a licensed property & casualty insurance producer in Missouri.