Funeral Home Insurance: What Types of Insurance Do You Need?
Funeral home insurance isn’t optional. Most localities and states require funeral homes to carry specific insurance coverage, and other coverages are broadly recommended for industry.
For funeral homes across Southeast Michigan and throughout the state of Michigan, selecting the right insurance program is especially important due to strict regulatory requirements for business insurance.
Allied Insurance Managers has been developing custom insurance programs for funeral homes and other businesses for over 30 years. These are the insurance coverages we would recommend for most funeral homes.
Workers’ Compensation
What It Covers: Medical bills and lost wages when an employee is injured on-site
Workers’ compensation isn’t just a recommendation. It’s required for private businesses operating in nearly every U.S. state, with the exception of Texas. It covers medical bills and lost wages if an employee is injured while lifting, handling formaldehyde, or performing other job duties. Additionally, the funeral industry sees more emotional and psychological stress claims, so it’s critical you work with a carrier that understands the hazards unique to workers in this industry.
Surety Bonds
What It Covers: Not an insurance coverage, but a contractual requirement between the funeral home and its clients
Surety bonds aren’t technically insurance, but many states require funeral homes to obtain them. These bonds, which are often called preneed funeral bonds, provide financial assurance in the event a business fails to fulfill its obligations to a client. In Michigan, the Prepaid Funeral and Cemetery Sales Act requires that these bonds be backed by either a trust fund or a preneed insurance policy.
Commercial Auto
What It Covers: Bodily injury or property damage caused by a funeral home’s drivers
Auto liability is required in most states if your funeral home owns or operates hearses, removal vans, or other business vehicles. This coverage protects against bodily injury or property damage caused by your drivers. In Michigan, funeral homes must make PIP elections for commercial fleets, and hired and non-owned auto coverage is recommended if staff are using personal vehicles for removals.
General Liability
What It Covers: Third-party injuries, including slip-and-fall accidents
General liability insurance protects against third-party injuries, such as slip-and-fall accidents, which are significantly more common in the funeral industry.
We highly recommend working with an agency or carrier familiar with the unique risks of funeral homes because standard policies won’t address funeral home-specific exposures, including body transportation liability and communicable disease exposure.
Professional Liability (E&O)
What It Covers: Professional mistakes
Professional liability (Errors or Omissions) covers professional mistakes, such as improper embalming, lost cremains, or documentation errors.
When you purchase professional liability coverage, the coverage usually applies to all employees of your funeral home, but always verify this detail with your insurance agency.
Additionally, funeral homes are licensed by LARA, which has its own standards for what constitutes negligence or malpractice, and the language in a funeral home’s insurance policy must align with LARA’s definition of liability.
Commercial Property
What It Covers: Physical assets owned by the business
Commercial property insurance protects physical assets owned by your business, including the building itself, equipment, furniture, caskets, and urns against fire, theft, and other covered losses. Commercial property does not cover business-owned automobiles.
Cyber Insurance
What It Covers: Data breaches and any other event that compromises sensitive data
Cyber insurance is still a relatively new coverage designed for digital risks. Depending on the policy, data breaches, cyberattacks, ransomware, and other threats might be covered. This coverage is especially critical for any business that handles sensitive information, such as Social Security numbers.
Business Income Insurance
What It Covers: Income from unexpected downtime
If an unexpected disaster results in downtime for your funeral home, business income/business interruption coverage helps replace lost revenue.
The financial coverage isn’t for rebuilding your property, but rather to help cover ongoing expenses afterward, including wages and utility bills. Your policy may make payments until you resume operations, or for a set period of time (e.g., 30, 60, or 90 days).
Bailee Insurance
What It Covers: Personal property (owned by others) that is under the temporary care of a funeral home.
Bailee insurance protects personal property belonging to others that is in your care. In the funeral industry, this can include the deceased’s clothing and jewelry, pre-purchased caskets, or displayed keepsakes.
In Michigan, funeral homes are held to a standard of ordinary care as defined by NFDA and Michigan’s Consumer Protection Act. Standard Commercial Inland Marine and general bailee endorsements have gaps that funeral homes need to consider:
- Some sentimental property claims can exceed actual cash value, so ensure you have adequate coverage
- Ensure you have emotional distress coverage; funeral directors have to handle and supervise emotionally charged environments
- Ask for MCPA defense coverage because bailee claims can trigger regulatory proceedings with separate defense costs
- Include preneed merchandise, or any property held under your preneed contract
Equipment Breakdown
What It Covers: Emergency repairs for damaged essential equipment
Equipment breakdown coverage pays for emergency repairs when essential equipment, such as heating or air conditioning, breaks down.
Funeral homes have expensive equipment, and failures often create simultaneous exposures across multiple coverage lines, including property loss (the equipment itself), bailee liability (dignitary harm to families), and business interruption (inability to offer services). Standard commercial property policies do not cover mechanical and electrical breakdowns, so without a dedicated policy, an incident like a refrigeration failure will result in uninsured loss.
How to Choose the Best Funeral Home Insurance
There is no “best” funeral home insurance. It comes down to choosing a program that matches your services, keeps you compliant, and closes coverage gaps.
When comparing options, consider:
- Your Operations: How many funerals or cremations do you handle each year? Do you operate your own crematory? How many licensed funeral directors and embalmers do you employ? Do you collect significant personal data from clients?
- Equipment: What is the age and condition of your equipment? Do you own or lease the equipment? What is the replacement cost valuation for your equipment?
- Regulations: Have you consistently been compliant with MIOSHA requirements? What is the current status of your LARA licenses? Do you have a registered preneed contract? Do you have an EGLE permit for cremation?
- Coverage Fit: Does the program address the unique risks associated with your funeral home? Are there any exclusions that matter, such as off-premises services, hired-non-owned auto, or crematory operations?
Customize Your Funeral Home Insurance Program
There’s no one-size-fits-all solution for funeral home insurance, and developing a program that addresses every risk unique to your business while remaining cost-effective is a tough balance to achieve.
If you don’t know what coverage you need, don’t take any risks. Let our experts at Allied Insurance Managers help you eliminate gaps. As an independent insurance agency, we have long-standing relationships with a wide range of carriers, allowing us to find options that keep you protected while helping you save money. As a Michigan-based agency, we’re also familiar with NFDA, MFDA, LARA, EGLE, MIOSHA, DIFS, and MDHHS requirements and have in-house preneed expertise.
Visit our website to learn more about who we are, or contact us today to get started with a free quote.
