For those facing a late-stage illness, your life insurance policy can be a source of much needed cash. One program is the Funds for Living and Giving (FLAG) program offered by Fifth Season Financial. Under the FLAG program, Fifth Season Financial will take over paying the premium on the life insurance policy, and will give the patient (the insured) a “substantial portion of the face value of that policy as an advance payment.” As soon as Fifth Season Financial assumes the role of administrator of the policy, it handles all of the remaining premium payments. Fifth Season’s President, Adam Balinsky notes “As we know, finding a cure for cancer is a difficult task. Finding a way to afford treatment, or maintain a good quality of life? That shouldn’t be difficult.”
A recent article in the New York Times by Paula Span “Wringing Cash From Life Insurance” indicates that the life settlement market is resurrecting itself – moving away from the affluent market and “courting middle-class people who own policies with face values of $100,000 to $500,000.” This could be good news for seniors looking for cash for medical expenses, or that once-in-a-lifetime trip around the world.
The annual costs of many “universal life” policies have skyrocketed in recent years. While this isn’t real “news” – after all, financial advisers have been warning about this for years, it is a real problem for retirees. Universal life insurance policies are a combination investment vehicle and insurance policy. Many people bought universal life polices based on “illustrations” that indicated there would be enough profit on the money invested to cover the cost of rising premiums as the insureds aged. Unfortunately, that hasn’t been the case. Many seniors now cannot afford to pay the ever-increasing premiums. Could it be time to sell your policy?
In a move that could save its Medicaid program millions of dollars, Texas recently enacted new legislation called the “Medicaid Life Settlement Law” that encourages seniors to sell their life insurance policies to pay for their custodial health care costs. The new Texas law allows individuals to enter the Medicaid program provided they use the proceeds obtained from a life settlement for long term care expenses. Similar bills are pending in several other states including California, Florida, New Jersey and New York. If passed, the modifications to the Medicaid rules should breathe new life into the life settlement industry, which has suffered in the last few years, both from a lack of capital and a lack of age appropriate sellers.
Policyholders benefit from these revised Medicaid laws and the new legislation legitimizes an industry that has often been criticized as being morbid and macabre. A life settlement can provide much needed financial resources for seniors facing the daunting expenses of long-term care and allow them to choose their own care provider, while preserving dwindling state coffers. The legislation also offers relief for families dealing with escalating nursing home costs.
In July, Berkshire Hathaway confirmed that it had purchased a life settlement portfolio with a face value of $300 million in face value from Coventry First for $60 million. Most of the activity in the life settlement market has continued to be portfolio sales, but new developments on the horizon indicate that the market is rebounding. Stone Capital Assets has long predicted that insurance companies will be the biggest investors in the life settlement industry as they should understand long duration asset and liability matching as well as anyone.
A recent article in LifeHealthPro’s April 12, 2013 online edition by Robin S. Weinberger and Peter N. Katz points out that “many accountants remain unaware of life settlements as an alternative to the lapse or surrender of a policy”. A quick internet search reveals dozens of blogs by many advisors with “advice” about insurance policies that neglect the alternative of life settlements. Life insurance policyholders should know their options – and the sale of a life insurance policy is a viable option for policyholders over the age of 65 with some health issues. Know your options before you surrender your policy or allow it to lapse! Read full article here.
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