North Carolina Funeral Law Practice Exam

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What is the main distinguishing factor between a preneed and a prearrangement?

The parties involved
The timeframe
If it is funded
The purpose of the arrangement

The correct answer is: If it is funded

The main distinguishing factor between a preneed and a prearrangement lies in whether or not the arrangement is funded. Preneed arrangements typically involve a financial commitment where a consumer pays for funeral services in advance, often through a trust or insurance policy, ensuring that the funds are secured for the future service. This financial component distinguishes preneed plans from simple prearrangements, which may involve discussions and decisions about services and preferences without an actual financial transaction. Prearrangements can simply be understood as the planning and communicating of desired funeral services without a commitment of funds, allowing families to know specific wishes without the financial implications. Thus, the funded aspect is what primarily separates preneed from prearrangement, making it a critical and defining feature in funeral planning practices.