Tennessee Funeral Service Laws Rules & Regulations (LRR) Practice Exam

What type of agreement must specify a clear non-refundable clause regarding funds?

1. Revocable agreement

2. Pre-need agreement

3. Post-need agreement

4. General service agreement

The correct answer is: Pre-need agreement

A pre-need agreement is a contract established before the need for funeral services arises, allowing individuals to plan and secure their funeral arrangements in advance. Such agreements often involve prepayment for services and merchandise, which is why it's important to include a clear non-refundable clause. This clause serves to protect the funeral service provider's financial interest and clarify to the consumer that once funds are paid, they will not be returned regardless of changing circumstances or decisions. In contrast, a revocable agreement allows individuals to modify or cancel the arrangement, which makes a non-refundable clause unnecessary and potentially misleading. Post-need agreements are made after a death occurs and typically do not involve prepayment, therefore a non-refundable clause would not apply. General service agreements outline terms of service but do not necessarily relate to prepayment or the specifics of refund policies. Thus, it is the pre-need agreement that is most directly associated with the necessity for a clear non-refundable clause regarding funds.