In nearly every case the answer is no, and the reason is more specific than “the policy is too small” — a Homesteaders policy is usually a preneed funeral funding contract that has already been assigned to a funeral home, and you cannot sell a death benefit you have already promised to someone else. Size is the second obstacle. The assignment is the first one, and most people do not realize they signed it.
Homesteaders Life Company is a mutual insurer founded in 1906 and headquartered in West Des Moines, Iowa. It does not compete for ordinary retail final expense business the way a Globe Life or a Colonial Penn does. It funds prearranged funerals, working through more than 3,000 funeral homes across 44 states, and independent industry studies have repeatedly identified it as the most-used preneed funding company in the country. If you have a Homesteaders policy, you almost certainly got it while sitting at a funeral home planning a service, not from a mailer or a television ad.
That origin changes the analysis completely. This page explains how preneed funding works, why the assignment matters more than the face amount, the Medicaid consequence that makes selling actively harmful for many families, and the four things that are genuinely worth doing instead.
In This Article
- What a Preneed Policy Actually Is
- The Assignment Is the Obstacle Nobody Mentions
- Revocable Versus Irrevocable, and the Medicaid Trap in Reverse
- The Size Problem, Stated Plainly
- Running the Numbers on a Real Preneed Policy
- The Narrow Exceptions Worth Checking
- What to Do Instead
- Frequently Asked Questions
What a Preneed Policy Actually Is
A preneed arrangement has two documents, and people routinely confuse them. The first is the funeral purchase agreement with the funeral home: an itemized list of goods and services — casket or urn, embalming, facility use, transportation, staff — at a stated price. The second is the life insurance policy that funds it, issued by a carrier like Homesteaders, with the funeral home named as assignee or beneficiary so the proceeds pay the bill when the time comes.
The insurance side is small-face whole life, typically single-premium or limited-pay over three, five or ten years rather than payable for life. Many preneed policies carry an increasing death benefit designed to grow alongside funeral cost inflation, so the face amount on your original paperwork is lower than the current death benefit. The face amount is sized to a funeral, not to an estate. For scale, the National Funeral Directors Association’s 2023 General Price List Study put the national median cost of a funeral with viewing and burial at about $8,300, and cremation with a service at roughly $6,300.
That is the whole design. It is a payment mechanism for one specific bill. It was never structured as a transferable financial asset, and that shows up in every part of how it behaves.
The Assignment Is the Obstacle Nobody Mentions
When you signed the preneed paperwork, you almost certainly executed an assignment of the policy proceeds to the funeral home. Depending on the state and the form used, it may be an absolute assignment transferring ownership outright, or a collateral assignment giving the funeral home a first claim on proceeds up to the contract amount.
Either way, you no longer control the full death benefit. A life settlement requires the owner to convey clear title to the policy, free of competing claims, and an escrow agent will not release funds until every assignment on file is released. A funeral home holding a valid assignment under a signed purchase agreement is under no obligation to release it. Our explainers on absolute assignments and collateral assignments spell out the difference, and it is worth reading both before you call anyone, because the answer determines whether you have a policy to discuss at all.
Check your own file. The funeral purchase agreement will name the funeral home and state whether the assignment is revocable. Homesteaders will also confirm on request what assignments are recorded against your policy number. Do that before anything else.
Revocable Versus Irrevocable, and the Medicaid Trap in Reverse
Preneed contracts come in two flavors, and the difference is the single most consequential fact in this entire subject.
A revocable preneed contract can generally be cancelled by the purchaser, subject to state law and the terms of the agreement. If the underlying policy is not separately assigned, cancelling may return the policy to your control and, in some states, entitle you to a refund of what was paid less allowed charges.
An irrevocable preneed contract cannot be cancelled, and that is usually the entire point. Under Medicaid eligibility rules in most states, an irrevocable prepaid funeral arrangement is an excluded resource, not a countable asset, and there is typically no cap or a generous cap on the amount that can be set aside this way. Families and elder law attorneys use irrevocable preneed deliberately during a Medicaid spend-down precisely because the money stops counting. If you unwind that arrangement to chase a small cash payment, you convert an excluded resource back into a countable one and can jeopardize eligibility. Read how life insurance counts as a Medicaid asset and how a nursing home spend-down works before touching an irrevocable arrangement, and talk to your own elder law attorney — this is exactly the kind of decision where general information is not enough.
Homesteaders is Iowa-domiciled, and Iowa regulates preneed purchase agreements under Chapter 523A of the Iowa Code, administered by the Iowa Insurance Division. Every state has an equivalent regime governing what a funeral home may do with preneed funds and what a purchaser may cancel. The rules that apply to you are the ones in the state where the agreement was signed.
| Situation | Can it be sold? | Better path |
|---|---|---|
| Preneed policy assigned to a funeral home, irrevocable | No — assignment blocks transfer and cancelling can break Medicaid exclusion | Leave it in place; verify the funeral home still operates |
| Preneed policy assigned, revocable, no Medicaid issue | No — face amount is far below market minimums | Cancel only if you no longer want the arrangement; check state refund rules |
| Unassigned final expense policy under $25,000 | Realistically no | Keep it, use cash value, or elect reduced paid-up if available |
| Same insured also owns a $100,000+ permanent policy | The larger policy may qualify | Review the larger policy; the small one comes along only as context |
| Terminal diagnosis, any policy with a rider | Accelerated death benefit first | File under the rider; generally income-excluded under IRC 101(g) |
The Size Problem, Stated Plainly
Set the assignment aside for a moment and assume you hold a clean, unassigned Homesteaders policy. It still will not attract a life settlement offer, because of arithmetic that has nothing to do with the carrier.
An institutional buyer’s fixed costs on a single transaction — one or two independent life expectancy reports, medical record retrieval, legal review, escrow, closing, and ongoing premium administration for however many years the policy remains in force — run into the thousands of dollars regardless of policy size. Those costs are the same on a $10,000 policy as on a $2 million one. That is why the practical floor across the market sits around $100,000 of death benefit, and why most providers set their internal minimum higher than that. A $12,000 preneed policy is not a small deal; it is a deal that cannot cover its own processing.
Our pages on minimum policy size and what to do when a policy is too small to sell go through the economics in detail. Nobody is refusing to look at your policy out of indifference. The transaction simply does not clear its own costs.
Running the Numbers on a Real Preneed Policy
Concrete arithmetic makes the point faster than argument. Take a 79-year-old who bought a $9,000 preneed policy at age 68 on a ten-pay schedule, now paid up, with a growth feature that has carried the death benefit to about $11,400.
On the settlement side, an institutional buyer would first commission at least one independent life expectancy report — often two, since providers routinely blend them and the difference between reports materially changes the price. Those reports alone typically cost several hundred to a couple of thousand dollars each. Add medical record retrieval, provider legal review, an escrow agent, closing costs, and then eleven or twelve years of policy servicing. Before a single dollar reaches the seller, the transaction has consumed more than the entire death benefit. There is no discount rate at which that clears.
Now look at the same policy from the family’s side. It is paid up, so it costs nothing to keep. It grows to track funeral inflation. It is contractually earmarked for a bill that will certainly arrive. And in a Medicaid context it may be sitting outside the countable-asset calculation entirely. The policy is doing something useful that no lump sum of a few thousand dollars would replace.
The uncomfortable version of this page’s advice is that the question “can I sell it” is usually the wrong question for a preneed contract. The better questions are whether the funeral home is still solvent, whether the death benefit still covers the current price list, and whether some other policy in the household is the one that actually deserves attention.
The Narrow Exceptions Worth Checking
Three situations are worth a second look before you conclude the file is closed.
Multiple policies on one insured. People who prearranged twice, or who bought a preneed policy and separately hold a retail whole life or universal life policy from another carrier, sometimes cross the threshold when everything is counted together. Providers evaluate the insured, not one contract, so list every policy in the household before deciding.
A separate, larger policy you forgot about. The far more common finding in this situation is not that the preneed policy is sellable, but that the same person owns a $150,000 universal life policy from the 1990s that is quietly heading toward lapse. That policy may be worth real money. The preneed policy is what prompted the question; it is rarely what the answer turns out to be about.
Terminal illness. A viatical settlement applies to an insured with a terminal or severely impaired prognosis and can involve smaller face amounts than a standard life settlement, though the same fixed-cost math limits how small. If there is a terminal diagnosis, the more productive first step is usually the accelerated death benefit rider on any policy that carries one, since a qualifying accelerated payment is generally excluded from income under Internal Revenue Code section 101(g) and costs nothing in fees.
What to Do Instead
Read the annual statement. Homesteaders sends one. Confirm four things: the current death benefit, whether it grows and at what rate, whether premiums are still payable or the policy is paid up, and every assignment recorded against it. Those four lines answer most questions people bring to this page.
Confirm the funeral home is still in business. Funeral homes are sold and consolidated constantly. If the home named in your agreement no longer exists, the successor usually assumes the contract, but you want that confirmed in writing. If nothing was assumed, the assignment picture may be different than you assume.
Do not cancel an irrevocable arrangement without advice. The Medicaid consequence is severe and largely irreversible.
Look at the whole household picture. If premiums have become unaffordable, or another policy is at risk, or someone is facing long-term care costs, the preneed policy is the least important item on the list. A free, no-obligation review can sort which policies in the household have real market value and which do not, and you will get a straight answer either way. Send the policy cover page or call (305) 209-7183. Pine Lake Life Solutions provides educational information only and does not provide legal, tax, or investment advice; consult your own elder law attorney or accountant before acting, and confirm product details directly with Homesteaders Life Company.
Frequently Asked Questions
Why can’t I sell a preneed policy even if I want to?
Because you likely assigned the proceeds to a funeral home when you signed the purchase agreement. A settlement requires conveying clear title free of competing claims, and escrow will not fund while an assignment is on file. The funeral home has no obligation to release it. Confirm what assignments Homesteaders has recorded against your policy number.
What is the difference between preneed and regular final expense insurance?
Preneed funds a specific prearranged funeral through a funeral home and is usually assigned to that home. Retail final expense is sold directly to the consumer, pays whichever beneficiary is named, and is not tied to any provider. Homesteaders operates almost entirely in the preneed channel through funeral home partners.
Will cancelling my prepaid funeral affect Medicaid?
It can, significantly. An irrevocable prepaid funeral arrangement is generally an excluded resource under Medicaid rules in most states. Unwinding it converts excluded value back into countable assets and may delay or defeat eligibility. Speak with an elder law attorney in your state before cancelling anything designated irrevocable.
How big does a policy need to be before anyone will bid?
Roughly $100,000 of death benefit as a practical floor, and many providers set their minimum higher. The fixed costs of life expectancy underwriting, medical records, legal review, escrow and closing are the same on a small policy as a large one, so smaller contracts cannot cover their own processing cost.
My preneed death benefit grows every year. Does that help?
It helps you, because it keeps pace with funeral cost inflation and protects against a shortfall at the funeral home. It does not change the settlement analysis, since the growth still leaves the death benefit an order of magnitude below the market’s working minimum. Verify the current amount on your annual statement.
The funeral home in my contract closed. What now?
Usually a successor firm assumes existing preneed contracts, but you want written confirmation of who now holds the obligation and the assignment. Contact Homesteaders with your policy number, and if no one will confirm, your state’s insurance division or funeral board handles exactly this complaint. Do not assume the arrangement lapsed.
Is any of my family’s coverage worth reviewing then?
Often yes, just not this policy. The frequent finding is a separate universal life or whole life policy of $100,000 or more from years earlier, quietly drifting toward lapse. Listing every policy in the household takes ten minutes and is where the real value usually turns up.
Find out what your policy is worth — free, confidential, no obligation.
A 15-minute educational review covers your eligibility, every alternative, and a realistic view of what each path would net you.
Related Reading
- Can I Sell A Final Expense Policy
- Policy Too Small To Sell
- Minimum Policy Size For A Life Settlement
- What Is An Absolute Assignment
- What Is A Collateral Assignment
- Life Insurance Counts Medicaid Asset
- Nursing Home Medicaid Spend Down
- Medicaid Face Value 1500 Rule
- Sell My Homesteaders Survivorship Policy
Pine Lake Life Solutions does not purchase life insurance policies and does not provide legal, tax, or investment advice. Information provided is for educational purposes only. Eligibility for any option, including life settlements, is not guaranteed and depends on individual circumstances, policy terms, underwriting, and market conditions. Consult independent legal, tax, or financial professionals before making decisions regarding a life insurance policy.