There’s more good news for senior consumers who are burdened with premium payments for unwanted life insurance policies and for those who are struggling to find ways to pay for long-term care expenses.
According to a report issued in July 2017 by the National Association of Insurance Commissioners (NAIC), life settlements – the sale of an in-force life insurance policy for a market-based settlement value in excess of the cash surrender value – is one option seniors might use to generate resources to pay for their long-term care (LTC) needs.
NAIC is the U.S. standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer review, and coordinate their regulatory oversight.
This endorsement of life settlements by such a respected national regulatory organization will go a long way in raising awareness about life settlements, as well as elevating the confidence level that the secondary market for life insurance is a safe and efficient solution for senior consumers who want to optimize the monetary value of unwanted life insurance policies.
In addition to life settlements, NAIC’s report noted a number of other private market options for financing long-term care. However, of all the options cited in the report regarding resources to pay for LTC, it is significant to note that the life settlement option is the only solution that does not require an up-front payment on the part of the policy owner to receive the benefit.
Below is an excerpt from the NAIC report regarding other options to finance LTC:
- Long-term care insurance may be an option for those who purchased the coverage before recent market events which have made this option too expensive for most seniors. Over the past 15 years, the number of insurers offering the coverage has diminished, and premium rates for newly issued policies have risen to levels that most seniors cannot afford.
- Hybrid life and annuity products combine life insurance or annuities with long-term care insurance. The more popular hybrids are funded through a single premium, which eliminates the risk of future premium increases but requires considerable liquid assets to pay the premium. Hybrids give the consumer the option to receive benefit dollars for necessary LTC services and, to the extent not used for LTC benefits, as death benefits or withdrawal/surrender benefits. Life/annuity LTC hybrid products may be either reimbursement or indemnity products and may be marketed as providing LTC benefits.
- Single premium permanent life insurance (whole or universal) is the most common life insurance-LTC hybrid policy sold with a long term care acceleration rider and a long term care extension rider. The acceleration rider will allow the policy owner to access the death benefit, typically in level monthly amounts over a 20 to 50 month period, to pay for qualified LTC services. The extension rider, which if added on the acceleration rider, will continue such payments for a set period after the acceleration rider has exhausted the death benefit.
- Annuity-LTC hybrids are a single premium deferred annuity that allows penalty-free withdrawals from the account value (i.e., the accumulation of premiums plus interest, net of expense charges and cash withdrawals) for qualified LTC services.
According to Darwin M. Bayston, president and chief executive officer of the Life Insurance Settlement Association (LISA), “This NAIC document is another step forward in the movement to make sure that every senior in America is aware that life insurance is personal property they can use as a retirement asset, and that they are informed of all options available to them if they own a life insurance policy they no longer need or can afford. LISA will continue its efforts to advance legislation, regulations and public information that promotes consumer awareness of the life settlement option as a financing mechanism for long-term care and other retirement funding needs.”
If you have a question about whether your life insurance policy qualifies for a life settlement, we will be happy to give you a no-obligation pricing estimate of your policy’s value in the secondary market. Contact us at 1-800-216-2513.