September 2017
LIMRA data shows that the life insurance market has stabilized since the 2000s, but companies and advisors are proceeding with caution. PAGE 26 Featuring Life Insurance Thought Leader
The Life Insurance Issue • Special Sponsored Section
GWG Life Finds the Solution to “Failure to Plan” In Your Clients’ Life Insurance Policies By Chris Orestis, Executive Vice President, Life Insurance Secondary Markets, GWG Life
• The
ith a manageable mortgage, $1.3 million in investments and a pay-as-you go lifestyle, John and Mary had done everything right to set up their retirement Chris Orestis to be the golden years that so many aspire to. But, there was one bill they hadn’t factored into their planning, and it wasn’t even something they could have managed — John’s 82-year-old mother was about to outlive the savings that she had been using to pay for her room in a nursing home in a small town in Minnesota. For millions of Americans approaching retirement, this is just one of the stories of sticker shock about unanticipated health care and living costs in retirement. Fidelity’s Retiree Health Care Cost Estimate shows that for a couple retiring today, the average health care costs paid during retirement are estimated to be $260,000. And if that’s not enough of a shock, consider that is the average cost and doesn’t include responsibility for an aging parent. The total could be even higher if a retiree is forced to seek long-term care. But, there is a potential solution that is already in many consumers’ homes, tucked away in a drawer — life insurance. Most consumers have no idea that the life insurance policy they bought to provide income for their heirs can be exchanged to pay for assisted living, home care and all other forms of long-term care. GWG Life, a leader in providing solutions for seniors, is getting the word out to agents and advisors about two new programs aimed at helping Annual Health solve the problems many cliAge Care Costs ents face in post-retirement:
These programs are aimed at finding new ways to serve your clients, even those you may not have been in contact with for years. The options move beyond simple cash transactions to sources of income to pay for needed care and expenses at a time when other options can be greatly limited. Here are a few key facts about how a life insurance policy can be converted to a long-term care benefit plan and potentially rescue seniors and their families from the backbreaking financial strain of paying for long-term care:
Book of Business Review Program, in which GWG Life experts review your book of business to find clients who could benefit from the LifeCare Xchange Program.
W
• The benefit plan is not long-term care insurance. A long-term care
benefit plan allows policyholders to use a universal life or term life insurance policy to pay for long-term care. In essence, you can turn a death benefit into a “living benefit” that covers the expenses of the policyholder now.
• You can convert when you need it. You can’t wait until you’re
about to move into a nursing home or assisted-living facility to buy long-term care insurance. At that point, it’s too late. But you may be able to convert a life insurance policy to a longterm benefit plan at any time. There are no waiting periods, no care limitations, and no costs or obligations to apply.
• The full death benefit comes into play. The value of the exchange
is not limited to the cash value, but is based on the death benefit. That means seniors will receive money they can use for their long-term care benefit plan. If the insured person dies
Annual Projected Costs vs. Social Security COLAs
• The LifeCare Xchange Pro-
gram, a tax-free benefit exempt from Medicaid spenddown requirements that can be used for health care and senior living expenses.
Average 66-Year-Old Couple Social Security
Annual Difference
Percent of Social Security Dedicated to Health Care Costs
70
$14,554
$35,946
$21,392
40%
75
$20,058
$40,869
$20,811
49%
80
$27,503
$46,464
$18,961
59%
85
$37,293
$52,828
$15,535
71%
87
$42,148
$55,610
$13,463
76%
The Life Insurance Issue • Special Sponsored Section
before the benefit amount is exhausted, any remaining balance is paid to the family or the named beneficiary as a final lump-sum payment.
Facility Care: Nursing Home (Private Room) Median Annual Cost**
The goal is to keep policies from lapsing or being surrendered to the insurer for a small cash value. That’s what happened to John’s mother who, faced with increasing premiums and a desperate need for cash to pay for long-term care, let her life insurance lapse. “We never anticipated having to pay for her care at the same time we were going into retirement,” John says. “It has been quite a shock to us. We thought we had planned for everything.” Part of the problem is that while millions of people own life insurance policies, few of them understand their rights as owners. Life insurance policies are assets. Think of them just like a house. Homeowners wouldn’t just move out without selling their property. Why should the owner of a policy “move out” without first finding out what the real value of the policy is? On July 19, the National Association of Insurance Commissioners (NAIC) endorsed the life insurance secondary market as a vehicle to fund long-term care. In a policy statement titled “Private Market Options for Financing Long-Term Care,” the NAIC’s long-term care subgroup described how proceeds from exchanging a life insurance policy on the secondary market can “fund a bank and trust account to make monthly payments directly to a designated long-term care provider” which can save taxpayers millions in Medicaid funds now being used for longterm care services. When you consider that, according to the Life Insurance Settlement Association, seniors are abandoning a staggering $112 billion of life insurance face value annually, it quickly becomes obvious that this kind of private market innovation can be a very powerful financial solution. Seniors don’t want to be a financial burden on their family or spend down to below the poverty level just to qualify for Medicaid. They want access to information and options that will allow them to remain financially independent and able to afford to pay for their own care. GWG Life is a leader in the secondary market for life insurance policies, providing seniors with over $418 million in exchange value for their life insurance since 2006.
Life insurance policies are assets. Think of them just like a house. Homeowners wouldn’t just move out without selling their property.
** Numbers exclude Puerto Rico
As part of our Book of Business Review Program, GWG Life is offering to analyze life insurance policies to see if they can be Xchanged to meet what we have identified as four important needs:
• Protection: Maintain a portion of the policy with a Retained Death Benefit.
• Income: Supplement retirement funds for life with an Immediate Income Annuity.
• Benefit: Pay health care and senior living expenses with a tax-free Long-Term Care Plan.
• Lump Sum: Generate immediate funds with a Cash Payout. Many of the policyholders may be hidden even to you, their life insurance agent, as they have fallen out of contact with you after they bought their policy. That’s why we developed our Book of Business Review Program, which can be used to renew the relationship while offering policy owners a new solution that can make you a hero to them. We believe this is a great opportunity to help your clients when they reach the most vulnerable time of their lives. If you want more information and to have your book analyzed, contact us. We would love to have you join us as a trusted partner and an Appointed Agent for our program. For more information about how you can tap into our resources to serve your clients, check out our website at lcx.gwglife.com. Your clients need to hear about this opportunity.
lcx.gwglife.com