Final Expense Insurance

[chasbo]

Feedback needed - I'm considering selling final expense insurance, but have some concerns on the best product. The target market is seniors 65+, low income. The company that I'm looking at has basicly whole life insurance products. Is this product the right product for the target market when 20% of these folks may be in a nursing home in 3-5 years, going through a possible medicaid spend down and if the policy cash value is over $1500 will have to cash out of their policy and the policy death benefit is now gone. Term policies are exempt from the spend down, but premiums would be very expensive. I understand there is a "Final expense Trust" product out in the market that could be the best product for the above situation,yes/no?

If yes, can someone recommend a product/carrier with good commissions that would me the above needs.

Also, would full disclosure be required for the medicaid spend down possibility with this target market, when you're selling a whole life final expense product?

Thanks,

Chasbo

 

[xrac]

Feedback needed - I'm considering selling final expense insurance, but have some concerns on the best product. The target market is seniors 65+, low income. The company that I'm looking at has basicly whole life insurance products. Is this product the right product for the target market when 20% of these folks may be in a nursing home in 3-5 years, going through a possible medicaid spend down and if the policy cash value is over $1500 will have to cash out of their policy and the policy death benefit is now gone. Term policies are exempt from the spend down, but premiums would be very expensive. I understand there is a "Final expense Trust" product out in the market that could be the best product for the above situation,yes/no?

If yes, can someone recommend a product/carrier with good commissions that would me the above needs.

Also, would full disclosure be required for the medicaid spend down possibility with this target market, when you're selling a whole life final expense product?

Thanks,

Chasbo

Newby is the best person to answer this. Search and read his posts and you may find the answer there. If not you will hear from him sometime.

 

[OHInsAGNT]

Feedback needed - I'm considering selling final expense insurance, but have some concerns on the best product. The target market is seniors 65+, low income. The company that I'm looking at has basicly whole life insurance products. Is this product the right product for the target market when 20% of these folks may be in a nursing home in 3-5 years, going through a possible medicaid spend down and if the policy cash value is over $1500 will have to cash out of their policy and the policy death benefit is now gone. Term policies are exempt from the spend down, but premiums would be very expensive. I understand there is a "Final expense Trust" product out in the market that could be the best product for the above situation,yes/no?

If yes, can someone recommend a product/carrier with good commissions that would me the above needs.

Also, would full disclosure be required for the medicaid spend down possibility with this target market, when you're selling a whole life final expense product?

Thanks,

Chasbo

You're making a lot of assumptions Chasbo. I believe you may be over thinking it. If you are going to sell life insurance, have more than one option for the client. Final Expense Whole Life is a great option for some people, not for all. You can't make judgement calls yourself about what will happen in five years. You need to present and explain the options to the client. Walk with them to a decision. Don't make it for them.

 

[moonlightandmargaritas]

Feedback needed - I'm considering selling final expense insurance, but have some concerns on the best product. The target market is seniors 65+, low income. The company that I'm looking at has basicly whole life insurance products. Is this product the right product for the target market when 20% of these folks may be in a nursing home in 3-5 years, going through a possible medicaid spend down and if the policy cash value is over $1500 will have to cash out of their policy and the policy death benefit is now gone. Term policies are exempt from the spend down, but premiums would be very expensive. I understand there is a "Final expense Trust" product out in the market that could be the best product for the above situation,yes/no?

An easy solution to this problem.

Make someone else (adult child, etc.) the owner of the policy.

Simple, clean, easy.

 

[Newby]

If you're that convinced that everyone will be in a nursing home and on Medicaid at age 68, you should be selling Long-Term Care Insurance.

If people believed they would be on Medicaid they would be scrambling to get assets out of their name (5-years in advance.) VERY few actually do that.

You should search on my old posts and there is a lot of info about funeral preplanning insurance which is exempt from Medicaid. Also do a forum search on the word "funeral" and also on the word "Medicaid"

That should give you a lot to read. Contact me anytime if I can be of further help.

Feedback needed - I'm considering selling final expense insurance, but have some concerns on the best product. The target market is seniors 65+, low income. The company that I'm looking at has basicly whole life insurance products. Is this product the right product for the target market when 20% of these folks may be in a nursing home in 3-5 years, going through a possible medicaid spend down and if the policy cash value is over $1500 will have to cash out of their policy and the policy death benefit is now gone. Term policies are exempt from the spend down, but premiums would be very expensive. I understand there is a "Final expense Trust" product out in the market that could be the best product for the above situation,yes/no?

If yes, can someone recommend a product/carrier with good commissions that would me the above needs.

Also, would full disclosure be required for the medicaid spend down possibility with this target market, when you're selling a whole life final expense product?

Thanks,

Chasbo

 

[retread]

Feedback needed - I'm considering selling final expense insurance, but have some concerns on the best product. The target market is seniors 65+, low income. The company that I'm looking at has basicly whole life insurance products. Is this product the right product for the target market when 20% of these folks may be in a nursing home in 3-5 years, going through a possible medicaid spend down and if the policy cash value is over $1500 will have to cash out of their policy and the policy death benefit is now gone. Term policies are exempt from the spend down, but premiums would be very expensive. I understand there is a "Final expense Trust" product out in the market that could be the best product for the above situation,yes/no?

If yes, can someone recommend a product/carrier with good commissions that would me the above needs.

Also, would full disclosure be required for the medicaid spend down possibility with this target market, when you're selling a whole life final expense product?

Thanks,

Chasbo

This is my thinking:

I am 65 and in good shape. I consider myself a long way from the needs of a nursing home. However, many of my low income clients are often in poor health because, being in the low income bracket, have not had access to good health care the majority of their life and will be susceptible to nursing home needs long before me. I don't have an issue with the 20% figure of the population over 65 having some need for LTC at some point. Keep in mind that Medicare covers Short Term Care that provides for Home Health benefits for ADLs on an intermittent basis. Perhaps some family members can fill in what Home Health Care is lacking. Then they may rehabilitate enough to not need ADL assistance for a while. Not everyone needs LTC in a nursing home environment the remainder of their life. This is not adddressed by LTCi agents who want to sell their product.

That said and done, these low income people are not candidates for LTCi. They cannot afford the premiums, and LTCi is structured to provide protection of assets (which they have little of) for middle income or higher folk. Therefore, Medicaid spenddown is to be expected. This will give them access to the state sponsored nursing home where they will get the care they need. It may not be the Waldorf Astoria, but it should meet minimum standards.

To sell them Term insurance is as futile as LTCi. Premiums are high, and if they are 65, a 20 year policy leaves them without coverage at 85 (most, if not all, carriers will not renew after 85), which they may outlive and have nothing, just like LTCi. IOW, if you don't use it, you lose it.

Whole Life with an LTC rider is more feasible than LTCi, but again, it must be affordable to them, and on a long horizon. If they get to the place they can't keep up their premiums, they lose again.

Too poor and they will look forward to Medicaid. Rich, and they need Whole Life/LTC rider. In between, you have to look closely... A Simplified Issue W/L may be the tool. Low face value but enough to cover burial. If enough resources, maybe a face value high enough to include final medical expenses along with burial. Counsel them on being practical with burial expenses... no fancy coffin, memorial service instead of graveside funeral, etc. Get some estimates from a local funeral home to help them arrive at a reasonable expectation (include inflation) and have them make some choices of their own. Then let them provide a copy to be passed on to their family to make clear their last wishes.

If you are requested help with insurance coverage for nursing home expenses and are a troubling aspect for your client, consider a Medicare Advantage Special Needs Plan that offers Nursing Home Coverage. Evercare has one of these SNPs. Other insurance carriers offer Nursing Home Insurance. Cost will be a determining factor.

The main purpose for Final Expense Insurance is to keep from burdening family with end-of-life financial expense. It is not designed to substitute for LTCi or Nursing Home Coverage. They may never enter a nursing home. They may just die suddenly from acute causation. You can't cover all bases with a cheap policy no matter how hard you try.

 

[chasbo]

Thanks for everyones comments - most appreciated.

The focal point I was trying to internally resolve was essentally "disclosure" i.e. if you do sell a small $5 - $7,000 whole life policy to an over 65 senior with low income and poor health, should you make them aware of the possible change to their DB (spend-down limit of $1500 on policy CV) if they do require Medicaid assistance? If no one explains this, they are expecting a DB of $7,000 at death, but will loose the DB and only get the $1500 medicaid surprise IF their policy CV exceeds that amount. I would expect most people would want to know this upfront. If I know this as an agent, don't I have an obligation to disclose this?

No one can predict the future, but if the probablility % is high for this event to ocurr in this niche market, perhaps a better product is available for this situation - some call this "suitability"!

 

[theinuranceguy]

Thanks for everyones comments - most appreciated.

The focal point I was trying to internally resolve was essentally "disclosure" i.e. if you do sell a small $5 - $7,000 whole life policy to an over 65 senior with low income and poor health, should you make them aware of the possible change to their DB (spend-down limit of $1500 on policy CV) if they do require Medicaid assistance? If no one explains this, they are expecting a DB of $7,000 at death, but will loose the DB and only get the $1500 medicaid surprise IF their policy CV exceeds that amount. I would expect most people would want to know this upfront. If I know this as an agent, don't I have an obligation to disclose this?

No one can predict the future, but if the probablility % is high for this event to ocurr in this niche market, perhaps a better product is available for this situation - some call this "suitability"!

Let one of the children be the owners of the policy.

As for the Funeral Trust, to my understanding there has not been one that is flex pay, they are lump sum.

So the only thing you can do is have your client purchase a policy, if they go in the nursing home, and they own the policy, you can move the cash value into a Funeral Trust.

Working on a case now where mother is in the nursing home and she has to sell her house. Once it sells we will be placing a funeral trust on her, and all her children. Maxed out.

 

[Newby]

Most seniors don't end up on Medicaid. If they do, they have to spend down their assets whether they are in a savings account or cash value in an insurance policy.

Like Ramiz said, they can borrow against the policy and pay it into an irrevocable funeral trust. I'm not sure "maxing it out" is alway wise since any amount over their funeral will go to Medicaid - NOT their family. They also could find a funeral home that would accept irrevocable assignment of the policy and it would be exempt from Medicaid in most states.

I have to disagree with Ramiz about one thing. Most funeral trust insurance companies do allow monthly payments, including NGL, FDLIC, ForeThought, Homesteaders, Guardian Life, Monumental, Great Western, Lincoln Heritage, Assurant, Southland, American Memorial, Columbian, Cincinnati Equitable and any other I have ever heard of. Most allow 3,5, and 10-year payments (monthly or annual) and some allow 20-year payments.

In my opinion, if someone is of very meager wealth, you are not hurting them by selling final expense insurance. If they CAN afford an actual funeral trust (or preplan) they would be better off buying that. But in no case should they make it an irrevocable assignment to a trust or a funeral home UNTIL they actually need to apply for Medicaid.

Opps! I have to disagree with Ramiz about two things. In MOST cases, (if the policy is intended for funeral expenses) you do not want to list an adult child or anyone else as the owner of the policy. This can cause ALL kinds of problems. If the child gets a divorce, their ex gets half the cash value. If they get sued, ALL the cash value is exposed. If the child goes bankrupt or just wants to go to the casino, the money is actually his...NOT the insured's. There is no reason to do that since assigning the policy to a funeral home has no 5-year lookback period.

If the policy is just intended to leave money to the child and is not for funeral/cemetery expenses, then by all means make them the owner. You can also make them the payor.

 

[chasbo]

Why is the disclosue issue being avoided? Again, if an agent has knowledge of the possible consequences of a whole life policy DB being essentally liquidated if Medicaid is implemented - do we have the obligation to disclose this or not?

When I first started in this business I was trained to do what was best for my customer, not best for my pocketbook. I was also taught to always look at suitability, ability to pay and to provide full disclosure relative to product being sold, etc., Isn't this the standard we still need in our industry?