Life Care Funding’s innovative program may provide a viable solution to this vexing issue. The company observed that most of these aging seniors were letting their life insurance lapse because they thought the premium was just too “cost prohibitive.” In light of the ongoing health care expenses being incurred by many seniors, they are beginning to realize they can no longer afford to leave the usual tax free benefit to their heirs by way of life insurance. Today, they are just concerned about how to pay for their health care costs.

A unique method of handling LTC
But now Life Care Funding is providing a method to convert life insurance (i.e., term, universal, whole life and even group term) into an immediate irrevocable and FDIC-insured long-term care benefit account “that will pay out on a monthly basis directly to the senior’s long-term health care providers” according to Steve Busam. He is the national marketing director for America’s First Financial Corp., which is the wholesaler rolling out Life Care Funding to agents and brokers. He says that while this is not necessarily a new approach, it’s the first time that agents and brokers can offer this value-added opportunity. It provides them a chance to provide this unique product to their clients. While the problem is important right now, it may well get worse as more and more baby boomers reach retirement age and are faced with the reality of limited financial resources.

Busam points to a recent NAIC study that shows that there is currently $10 trillion of life insurance in force. “This in-force face amount is spread over about 153 million individual policyholders.” The question, he says, “really needs to be how many billions of in-force policies belong to aging seniors?” Additionally, “how many of them are having to now spend down their personal assets for health care costs because no health care pre-planning was done when they were healthy?” Many of these aging seniors are looking for additional assets to help pay for their costs and are letting their life insurance lapse to cut expenses. This is a situation that is found daily “but does provide an opportunity to help these individuals right now.”

For those individuals who are fortunate enough to have a life insurance policy in force but are thinking about lapsing their policy, Busam points out “they should be aware that there is now possibly a way to receive up to one, two or three years or more of covered health care costs.” Life Care Funding will review the life insurance policy as well as the health of the aging senior and, if the individual qualifies, will make an offer of a percentage of the face amount. These funds will be placed in an Irrevocable Long-Term Care Immediate Benefit Account that is FDIC insured. This account will, he says, then make monthly agreed-upon payments directly to the health care provider. If all the funds are exhausted before death, the account will retain up to $5,000 to assist with funeral expenses. If the account is not exhausted at the time of the aging senior’s death, the balance of the account will be paid out to the named beneficiaries, just as in a traditional life insurance arrangement.

Busam says Life Care Funding has a simple, “no cost and no obligation” application review process that can take usually between 35 and 60 days to provide the owner with a converted life insurance offer. He notes that the Life Care Funding program is directed at seniors with life insurance policies between $50,000 and $1,000,000. “We primarily talk about seniors but there is no minimum age other than the need of the individual having long-term care type expenses.” Busam goes on to note that “once converted, there are no additional premium payments owed by the individual.” So rather than simply let the life insurance policy lapse and get nothing, owners of the life insurance policy can use it to provide help with LTC expenses.

This concept is currently being implemented and promoted by hundreds of home health care agencies, assisted living facilities, and nursing homes across the country. This concept also is being embraced and encouraged by several state governmental agencies, notes Busam. Numerous states, including California, Kentucky, Maine, New York, Florida, Louisiana, Texas and New Jersey, have already introduced bills with the intent to make sure people know that they have the legal right to use their life insurance policy to pay for products like the Life Care Funding LTC arrangement. Texas has already passed this legislation and the bill became law on January 1.

“Make no mistake,” Busam points out, “Life Care Funding will not be for everyone.” But, he says it is yet another creative way the insurance industry is making it possible to help fund and pay for LTC and related health care expenses. As pointed out in a recent New York Times article, seniors can quickly get into a “liquidity crunch” and paying the premiums on their life insurance policies doesn’t make sense, so they just walk away from the policy. “By advising their customer base about a better way to use this asset, agents and brokers not only provide a real value-added service, but they also can profit from it as well.” According to Busam, “these programs generate commission of 3% on policies with face amounts above $100,000 and 2% on policies below $100,000.”

Conclusion
Everyone from the Wall Street Journal to the New York Times has written about the magnitude of this problem. Political support for concepts such as this has been growing, and interest in advising seniors of their options is also growing by the day. The key to this approach, says Busam, is to make certain that seniors are aware of the fact that there is a viable option to just “abandoning life insurance policies they can no longer afford.” Agents and brokers should consider taking advantage of this unique opportunity to assist their older clients, provide a valuable service and obtain an additional source of revenue for their organizations.