The Benefits of Life Care Funding
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by Chris Orestis
6/1/2011
A Life Insurance Conversion Program is a new type of program and at the time of writing, there was only a single organization offering the program. The program’s name is the Life Care Funding Assurance Benefit Plan (ABP).
For example, a policyholder sells their policy for $36,000. They move into an assisted living community that costs $3,000 / month. The policy buyer will pay directly to the assisted living community, the complete cost of care for one year ($3,000 / month x 12 months = $36,000). Should the assisted living resident pass away before the year is complete, there is a preservation of assets clause that will pay out the remainder of the agreed upon amount to a designated individual.
The policy would be of no value to the individual were it allowed to lapse and the cash surrender value might be very low relative to the policy amount. By converting the policy into long term care payments, the policy holder is able to get greater economic value from the policy then the cash surrender value and they receive that benefit while they are alive and require care. The other benefit of the Assurance program is that for the duration of the agreement, the family is freed from the administrative tasks of managing the policy and managing payments to their care provider.
To read the entire Assurance Benefit Analysis by Paying for Senior Care, click here
by Chris Orestis
2/27/2011
Emeritus, Seattle, a national provider of assisted living services to seniors, says it entered the alliance to raise awareness of the Assurance Benefit offered by Life Care Funding, Portland, Me. The Assurance Benefit converts the death benefit of an active life insurance policy into a long-term care benefit to help pay for long-term care services.
With 479 communities nationwide, Emeritus Senior Living works with seniors to determine financial solutions to help them make the move to an assisted living community.
“Our goal at Emeritus is to ensure that seniors are properly cared for, and part of that goal is to help families with the financial decisions and details involved in caring for their loved ones,” said Jayne Sallerson, executive vice president of sales and marketing at Emeritus. “Many seniors and families are unaware that their life insurance policies are valuable assets and can be used in this way. And as a result some let active policies lapse.”
—Warren S. Hersch
Click for article published in National Underwriter, 2-25-2011
by corestis
2/7/2011
What NCOIL’s Life Insurance Consumer Disclosure Model Act Means
Too often when seniors and their families contact their life insurer about their old policies, they are given only three options: surrender the policy for its cash value (if it has any), pay the premium or let it lapse.
Most people who receive a lapse notice have a policy with no cash value because it has already been drained by the carrier to make premium payments. That typically leaves a final option of paying the premium or walking away. The number of seniors allowing this to happen to a policy after paying premiums, sometimes for decades, is scandalously high. State law makers around the country have noticed this situation and are now taking action to make sure policy owners are informed of their options before they abandon a life insurance policy.
Click to read article in entirety
by corestis
1/10/2011
For many policy owners, life insurance is an easily abandoned illiquid asset. The vast majority of in-force life insurance policies will never pay a death benefit because they either expire, lapse, or are surrendered for cash value. The New York law, as well as other legislative and market activities, point to the growing realization that life insurance policies are an asset well-suited to help pay for long term care.
Too few seniors realize that their policy could be used for purposes other than a death benefit, but the word is rapidly spreading among policy owners and lawmakers. Another recent example of legislative action in support of using life insurance as a tool to help pay for long term care costs is last month’s passage of NCOIL’s Life Insurance Consumer Disclosure Model Law. (Versions of the law have already passed or are under consideration in Oregon, Washington, Maine, California, Wisconsin, and Kentucky.)
“It is imperative that policyholders understand that they have alternatives to merely lapsing or surrendering their policy,” said NCOIL President Rob Damron upon the model law’s unanimous passage. “The model would require a clear notice to consumers, listing eight available options, including accelerated death benefits, conversion to long term care, and the possibility of a life settlement.”
In the law, life insurance companies are legally required to inform policy owners older than 60, or if they have a terminal or chronic condition, that they have eight alternative options to consider before lapsing or surrendering a policy – and one of them is converting a life insurance policy into a long term care benefit plan.
The long term care conversion option opens up the ability to use a life insurance policy for long term care to an even wider population than the New York accelerated death benefit law. There is no minimum requirement of three months' residence in a long term care facility, and unlike long term care insurance, there are no waiting periods to receive benefit payments. Policy owners unable or unwilling to keep their life insurance in force can convert their policy to pay for the costs of assisted living and home health care, as well as for nursing home care.
To read the entire article published by Agent's Sales Journal 1-5-11, click here
by corestis
11/19/2010
Final Testimony – Life Care Funding Group
National Conference of Insurance Legislators (NCOIL)
Life Insurance & Financial Planning Committee
November 19, 2010
Thank you to the members of the Committee for allowing me to participate in this very open, inclusive and thoughtful process.
I am Chris Orestis, President of Life Care Funding Group. We work with seniors and their families throughout the Untied States to help them raise funds they need to cover the costs of long term care. We specialize in converting a life insurance policy into a long term care benefit plan.
The Consumer Disclosure law currently being considered is important from three perspectives:
1) This is not about life settlements; it is about consumer rights to have access to information and options to get the best possible use and value for a life insurance policy based on their specific circumstances.
2) The consumer most helped by this law is the middle class policy owner about to discard one of their most valuable assets without the benefit of advisors or the knowledge that they have a number of alternative options to consider.
3) The intersection of a growing senior and Baby Boomer population and economic bust is creating a crisis for how seniors will fund their retirements and eventually long term care expenses.
This disclosure law will help consumers understand they have a number of options to consider before discarding a policy, including converting their policy into a long term care benefit plan that holds the potential to address their financial shortfalls.
Our case workers hear from seniors and their families every day who have been paying premiums for years and are getting ready to abandon their policy. These are middle class Americans without insurance expertise and the typical size of their policy is well under $500,000. They are being told by their insurance company that their only option is to pay or walk away.
Just two weeks ago we heard from a family with a $95,000 life insurance policy entering its grace period. Their mother is in the process of making the move into long term care and they could not afford the monthly expenses. They called their insurance company to ask what they could do with their policy and they were told their only option was to pay the premiums or let it lapse. Then they contacted us. And now instead of allowing the policy to lapse, we are converting it into a long term care benefit plan that will help cover her costs of care and keep her off of Medicaid for at least the next two years.
With this Consumer Disclosure law, policy owners will not make decisions based on a lack of information and instead will be informed that they have a number of options to consider first that could make a significant difference in their lives, and at a time when they need it most.
READ NCOIL's OFFICIAL STATEMENT ON PASSAGE OF THE LIFE INSURANCE CONSUMER DISCLOSURE MODEL LAW:
NCOIL Official Statement on Consumer Disclosure Passage.pdf (32.05 kb)
by corestis
10/15/2010
Now that we have arrived at the long awaited generational stage in our society that “Baby Boomers” are reaching the age of Medicare eligibility, the need to address the question of who is going to pay for a massive increase in long term care spending has become paramount. Exacerbating the growing crisis is the impact of the economy on the availability of private pay dollars and government spending. For the last two years we have watched as one of the primary sources of private funds, equity in the homes of seniors has evaporated.
State and federal budgets feeling the pinch of an eroding tax base and out of control spending on health care have started cutting back on Medicare and Medicaid spending. The cost of long term care continues to rise every year, and seniors (and their families) confronting the realities of what it costs to provide home based care, assisted living, or long term nursing home care are looking for solutions.
Annual Costs of Long Term Care
- Skilled Nursing Facility (SNF): $79,935
- Assisted Living Facility (ALF): $37,572
- Alzheimer’s Unit: $85,045
- Home Healthcare: $43,065
Met Life Mature Markets Institute 2009
One asset to look at for liquidity is an in-force life insurance policy. A policy owner could look at taking the cash surrender value or a loan against the policy. But for many policy owners there is little to no cash value and the liquidity available through these routes would be insufficient. In that case, another option would be to convert their life insurance policy into a long term care benefit plan.
More and more senior care companies around the United States are using this approach to help families overcome a gap in their ability to fund the most appropriate form of senior housing and/or care. Life Care Funding Group works with over 3,000 assisted living properties, nursing homes and home health agencies around the U.S. to help families convert a life insurance policy they no longer plan to keep in-force and turn it into a long term care beneift plan.
Case Study
A family wanted to keep their father at home who is suffering from cancer. He wanted to remain in the comfort of his own surroundings and with his loved ones for the remainder of his life. They did not have enough money to afford the costs of care at home, but he owned a $250,000 universal life policy and they all agreed they would rather liquidate the policy and use the proceeds to keep him in place. There was no cash value in the policy but they converted the policy into a long term care benefit of 60% of the total face value. That level of benefit would be more than enough to cover the costs of care for their father and was a much better alternative then allowing the policy to lapse.
The family was about to let their policy lapse and had no idea that they held a legally recognized asset that they had the right to convert into the most advantageous manner possible. If they had not been informed of their options they would have discarded the policy and been forced to suffer through with insufficient liquidity. There has been much debate about how to pay for long term care, but in these and many other cases converting a life insurance policy to address the immediacy of a healthcare funding crisis made all the sense in the world.
In the case of converting a life insurance policy to cover a financial shortfall preventing someone from securing the best possible long term care options, there could be no more obvious choice.
Read a Testimonial Letter from a family who recently used the Assurance Benefit option to convert a life insurance policy into a long term care benefit plan to care for their father, CLICK HERE: Scan_Doc0016.pdf (717.88 kb)
by Chris Orestis
9/25/2010
Posted September 21, 2010 4:24PM PST
Proposed changes to the consumer disclosure model act by life insurers were rejected last week by a National Conference of Insurance Legislators (NCOIL) committee.
The Life Insurance & Financial Planning Committee plans to hold a second conference call on Friday to look at the proposed model act again, according to Jordon Estey, director of legislative affairs and education for NCOIL.
NCOIL's proposed consumer disclosure model act would require insurers to let insureds who are 60 or older or are known by insurers to be chronically or terminally ill to be told about life settlements or other options if they are planning to surrender or lapse their policies.
The committee is preparing a final model act proposal to be considered for adoption at the group's annual meeting on Nov. 18 to 21 in Austin, Texas.
The committee rejected proposed changes to the model act by an insurance trade group and a carrier that would have weakened the model act. If passed by NCOIL, the model act can be used as a basis for state laws throughout the country next year.
The American Council of Life Insurers (ACLI), representing major carriers, had suggested a disclosure provision like the one passed by the California Legislature last year. That version would have required carriers to advise policyholders if they were considering making a change in the status of their policies to consult an insurance or financial adviser.
MetLife had proposed a written notice to be developed at no cost to insurers saying that life insurance, life settlements or other alternatives to lapsing or surrendering a policy may not be available to a particular policy owner, depending on his or her circumstances, and such policy owners should contact an adviser, agent or broker to get further advice.
by Chris Orestis
9/9/2010
First it was passed in Washington State. Oregon and Maine soon followed with similar laws and now more states are in the process of following their lead. The law that started out small but is now growing fast is the Life Insurance Consumer Disclosure Law and now the National Conference of Insurance Legislators (NCOIL) is drafting a model law for every state legislature in the country. It will require that life insurance companies inform policy owners that they have numerous alternative means to extract value from their policy at the time they are considering allowing it to lapse or surrendering it for any remaining cash value.
The insurance commissioners and law makers in those states recognized the valuable opportunity a life settlement and other options might offer as an alternative to lapsing or surrendering a policy. They did not want to see impediments to their citizen’s ability to access the secondary market to realize the maximum value of a life insurance policy. So these states passed laws mandating that it is the responsibility of the insurance company to inform their policy holders at the time of a lapse or surrender of the existence of alternatives.
Life Care Funding Group testified this summer before NCOIL about the importance of giving seniors and their families as much information as possible about their legal rights and options. Many of the families helped by Life Care Funding Group have a need to pay for expensive long term care services, and the committee recognized the importance of using an asset that otherwise would be discarded to cover these costs.
“We are living in a time when we must be doing all we can to get as much information as possible into the hands of seniors”, testified Chris Orestis, president of Life Care Funding Group. “When a senior and their family is informed that an asset (life insurance policy) they are about to throw away has unrealized value for them, and it is a potential solution to a health care crisis they are confronting, the consumer wins when they are able to access the most appropriate form of long term care and the state wins when a citizen is able to extend their ability to cover the costs of long term care for as long as possible before accessing Medicaid”, concluded Orestis before the NCOIL committee.
In an official statement issued on July 12th, Georgia State Sen. Ralph Hudgens reported to NCOIL's executive committee that he was asking Kentucky Rep. Ron Crimm to craft a life insurance options model bill in the next few weeks by melding similar laws that already have passed in Maine, Washington and Kentucky. Hudgens said he expects the model act will be taken up at NCOIL's November meeting in Austin and adopted.
The model would actually take the disclosure requirements to the next level by specifying numerous alternatives to lapsing or surrendering a policy. The option for a life settlement would be one of as many as a dozen choices a policy owner could consider. Options such as converting a policy’s death benefit to a long term care benefit, annuities, loans and accelerated death benefits would also be part of the mandated disclosure.
To read more about NCOIL's Disclosure Law and Bill of Rights, click here: http://www.theinsurancebellwether.com/2010/08/ncoil-seeking-comment-on-beneficiaries.html
by Chris Orestis
8/18/2010
Copyright 2010 SNL Financial LCAll Rights Reserved SNL Insurance Daily
August 6, 2010 Friday
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Katie Darden
The president of the National Conference of Insurance Legislators added his voice to a chorus of concern over retained-asset accounts for life insurance death benefits.
"NCOIL has grave concerns and awaits with extreme interest the outcome of current probes, including Veteran Administration and New York Attorney General investigations," Kentucky state Rep. Robert Damron said in an Aug. 4 press release.
Damron advocated a "Beneficiaries Bill of Rights" that would "guide" states that have not already adopted models for dealing with retained-asset accounts. The release noted that NCOIL is working on a model disclosure law for its annual meeting that would require insurers to notify policy owners of their rights and options with respect to life insurance policies. The meeting is scheduled for Nov. 17 through Nov. 21.
August 12, 2010
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by Chris Orestis
7/11/2010
Chris Orestis discusses Life Insurance Consumer Disclosure legislation before the NCOIL Life Insurance and Financial Services Committee
(July 9, 2010)— Life Care Funding Group’s president, Chris Orestis testified in Boston on Friday, July 9th about the important role that Consumer Disclosure Legislation in states such as Maine, Washington, Oregon and Kentucky can have as a model for other states to consider in the coming legislative year. The legislation enacted in these four states has become an important precedent as it compels life insurance companies to disclose to policy owners at the time they would lapse or surrender a policy that they have other options to consider to receive higher market value for their policy.
Also appearing on the panel was Michael Friedman, Senior Vice President of Government Affairs for Coventry First and Michael Lovendusky, Associate General Counsel for the American Council of Life Insurers (ACLI). Mr. Friedman spoke in support of the legislative precedent and the need to support state efforts as they consider legislative action to ensure policy owners are informed of all of their financial options. Mr. Lovendusky speaking on behalf of the life insurance industry emphasized the industry’s staunch opposition to consumer disclosure, stating for the record that the idea is “abhorrent” to the industry.
Mr. Orestis discussed his company’s commitment since its inception in 2007 to working with seniors and their families to provide them with as much information and access to financial resources as possible. He pointed to the law passed in Maine requiring insurance companies to disclose to policy owners that they have other options instead of lapsing or surrendering a life insurance policy they no longer can afford regardless of its death benefit amount as an example of what should be done around the country.
“We are living in a time when we must be doing all we can to get as much information as possible into the hands of seniors”, testified Chris Orestis. “When a senior and their family is informed that an asset (life insurance policy) they are about to throw away has unrealized value for them, and it is a potential solution to a health care crisis they are confronting, the consumer wins when they are able to access the most appropriate form of long term care and the state wins when a citizen is able to extend their ability to cover the costs of long term care for as long as possible before accessing Medicaid”, concluded Orestis before the NCOIL committee.
To obtain the complete transcript of Chris Orestis’ testimony before the Life Insurance and Financial Services Committee of NCOIL, Click Below:
Remarks NCOIL.doc (30.00 kb)
UPDATE 7/12/10--
New NCOIL Model Act on Consumer Disclosure to Be Drafted
Posted July 12, 2010 5:00PM PST
The National Conference of Insurance Legislators (NCOIL) plans to begin drafting a new model act requiring insurers to tell consumers of their options, including life settlements, if they plan to get rid of their policies.
Georgia state Sen. Ralph Hudgens said he reported to NCOIL's executive committee on Sunday that he was asking Kentucky Rep. Ron Crimm to craft a life insurance options model bill in the next few weeks by melding similar laws that already have passed in Maine, Washington and Kentucky.
Hudgens, who heads the Life Insurance & Financial Planning Committee of NCOIL, said this model legislation would be separate from the model act on life settlements that was adopted by NCOIL in 2007. Once the draft is complete, it will be sent to interested parties for comment, he said.
Hudgens said he expects the model act will be taken up at NCOIL's November meeting in Austin and adopted.
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