Pre-need

What they are

These are savings vehicles that you fund in advance before the actual need arises.

The common types of products are:

Pension: You can a guaranteed amount of money to help fund your retirement.
Educational: A savings plan to pay for the education of your child.
Memorial: A contract that pays a fixed amount after a period of time, which you can then use to pay for the expenses related to burying a loved one.

What you earn

You receive a certain fixed amount at a fixed date.
Usually, you also get life insurance coverage for the same period, which will pay benefits to your beneficiary in case you die before the contract ends.

What they cost

You pay premiums once or a certain period of time.
You get taxed on your premiums.
The premium includes of course the cost of the pre-need company, to cover its operating expenses and the commission it pays the agent who sold the policy to you, and earn money at the same time.

What's good

They really are just savings plans, but somehow like endowment policies since they're also contracts that guarantee a fixed amount of money. You know exactly what you'll get, unlike other investments, which go up and down.
It's forced savings in a way, because you have an obligation to keep paying your premiums. The disincentive not to pay is huge - you get nothing.

What's bad

They can be expensive.
They don't earn as much if you otherwise just invested on your own. After all, if they’re guaranteeing the amount they'll pay you, they have to be more conservative in the rate of return they promise.
They'll pay a fixed amount, which is not a guarantee they will beat inflation. Some people think they can relax and take it easy after five years of paying for a pre-need plan. Fixed plans will not necessarily pay for your child's entire education or for all your burial-related expenses.
If your policy lapses because you fail to pay all your premiums, you get nothing.

Where to get them

Pre-need companies, of course.

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