OVERVIEW

Frequently Asked Questions about LCBA and LCBA Insurance & Annuity Products

I’ve never heard of LCBA. Who are they?
How safe are they?
Do I have to be in great health to qualify for insurance?
What’s the rate of return on LCBA Plans?
Do I have to assign the policy to the funeral home?
Can I change my mind on what funeral home I use?
Who has to pay the taxes on the policy?
What if there is more money in the policy than the cost of the funeral services?
What if the cost of the funeral services requested exceeds the death benefit?
After I die, can anyone change my funeral arrangements?
What happens if I stop making payments on my “multi-pay” life insurance policy? (A policy that is purchased on the “installment plan”.)
What happens if I stop making payments on my Pre-Need Annuity?
Why don’t I get a 1099 form on my life insurance policies?
Why don’t I get a 1099 on my Annuities?
What happens if I change my mind and want my money back from my funeral pre-arrangement?
Can I move my insurance or annuity policy to a different funeral home?

Q:  I’ve never heard of LCBA.  Who are they?

A:  LCBA stands for the Loyal Christian Benefit Association.  LCBA is a not-for-profit fraternal benefit society founded in 1890 in Titusville, PA.  It’s operations moved to Erie shortly thereafter, and today LCBA is located on upper Peach Street in Erie.  LCBA has been providing final expense insurance for Christians since our beginning, and has focused on providing pre-arrangement funding products since 1995.  It operates in 35 states and the District of Columbia.


Q:  How safe are they?

A:  LCBA, like all insurance providers in PA, is regulated by the PA Department of Insurance.  In addition, we are subject to oversight and regulation by the 35 states we operate in.  We currently have nearly $200 Million in assets under management.


Q:  Do I have to be in great health to qualify for insurance?

A:  No.  We realize that most people applying for Pre-Arrangement life insurance are going to have some health issues.  As long as the person is not terminally ill, they will most likely qualify for insurance.  In the event they don’t qualify for life insurance, LCBA has an annuity plan that everyone qualifies for.


Q:  What’s the rate of return on LCBA Plans?

A:  The death benefit on our life insurance and annuity plans grow at a competitive rate.  We pay growth to the date of death. Please give us a call or speak to your funeral director for the current growth rate on LCBA policies.


Q:  Do I have to assign the policy to the funeral home?

A:  No.  However, in order to qualify for Medicaid nursing home benefits, the policy needs to be irrevocably assigned to someone other than the insured.


Q:  Can I change my mind on what funeral home I use?

A:  Yes.  Upon receiving written request from the owner of the insurance or annuity certificate or their P.O.A. or Guardian, LCBA will make arrangements to transfer ownership and beneficiary to an alternate funeral home.


Q:  Who has to pay the taxes on the policy?

A:  All Life Insurance and Annuity Plans grow on a tax deferred basis – no 1099 is generated on the growth each year.  At the time of death, life insurance plans pass to the beneficiary income tax free.  Annuities do generate a 1099 to the beneficiary however, since all of the money received as payment for funeral services is considered income, it does not create any additional tax burden to the funeral home.


Q:  What if there is more money in the policy than the cost of the funeral services?

A:  LCBA is required to pay out the death benefit to the named beneficiary – and for pre-arrangement funding that is normally the funeral home.  Many funeral homes work under the philosophy that the funds are in fact the property of the insured or annuitant, so if there is an excess of funds, the excess will be returned to the estate of the deceased or to the family, however this varies from state to state.  In Ohio if the funeral is guaranteed, the funeral home is entitled to keep all of the funds from the death claim.


Q:  What if the cost of the funeral services requested exceeds the death benefit?

A:  It depends upon the funeral planning agreement between the funeral home and the person making the arrangements.  If the funeral home agrees to guarantee some or all of the goods and services in exchange for the payment up front, the family is not obligated to come up with any more money.  Most funeral directors are no longer able to guarantee the goods and services they do not have direct control over (like obituaries in the newspaper and grave opening and closings at the cemetery), so there may be additional costs at the time of the funeral even though the funeral was pre-funded.  It’s best to discuss how these agreements work with your funeral home before you enter into one.


Q:  After I die, can anyone change my funeral arrangements?

A:  That varies from state to state.  Your funeral director should be able to answer that concern.  In Pennsylvania and Ohio, the person responsible for the disposition of the body determines what arrangements are actually performed, regardless of what arrangements were made in advance.


Q:  What happens if I stop making payments on my “multi-pay” life insurance policy?  (A policy that is purchased on the “installment plan”.) 

A:  The policy will revert to a reduced-paid-up status based on the cash value that has accumulated within the policy.  Generally this “reduced-paid-up” amount is significantly smaller than the original face amount of the policy.  Policies that have reverted to reduced-paid-up status can be re-activated by paying the back premiums due and answering some health questions.


Q:  What happens if I stop making payments on my Pre-Need Annuity?

A:  The policy will grow in value at a slower rate.  It will continue to earn interest, but since no additional contributions are made, the growth is significantly slower and may never reach the balance needed to provide for the funeral that has been planned.


Q:  Why don’t I get a 1099 form on my life insurance policies?

A:  Life insurance cash values grow on a tax deferred basis in most modern policies.  Today most insurance policies (including LCBA Pre-need policies) invest dividends generated by the policy each year in small amounts of additional insurance coverage called “paid up additions” that provide additional insurance benefits and grow on a tax deferred basis.  Death Benefit proceeds are also received income tax free to the beneficiary.


Q:  Why don’t I get a 1099 on my Annuities?

A:  Like life insurance, annuities grow on a tax deferred basis.  Pre-Need annuities used to fund funeral pre-arrangements will generate a 1099 to the beneficiary at the death of the annuitant, however since all of the income to the funeral home is considered taxable income, it’s not a concern. 


Q:  What happens if I change my mind and want my money back from my funeral pre-arrangement?

A:  It depends upon when that request is made, and whether the policy the money was placed in was irrevocably assigned or not. 

  • If the request is made with in the first 20 days after the policy is issued, LCBA will return the money to the original owner of the policy under the “free look” provision, typically in care of the funeral home.
  • If the request is made after the initial “free look” period and the LCBA policy is irrevocably assigned, the policy cannot be surrendered.  If the request is being made to come into compliance with State Medicaid Regulations because it was originally overfunded, we will release the excess amount upon written approval from the owner and the funeral home to which the policy has been irrevocably assigned.

Q:  Can I move my insurance or annuity policy to a different funeral home?

A:  Yes.  The original owner of an LCBA policy can name a successor assignee/owner on LCBA insurance and annuity policies that have been irrevocably assigned.