Scroll down for a discussion on Final Expense Insurance within the General Insurance Agent Discussions.
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. ...
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?
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.
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.
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.
------------------------------------
[COLOR=blue]Don't steal - the government hates competition.[/COLOR]
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.
Originally Posted by 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?
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.
------------------------------------
To be truly independent, an agent should not be dependent on a government bureaucrat for contracts or commissions.
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"!
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.
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.
Last edited by Newby : 11-16-2008 at 01:22 PM.
Reason: My brain kept thinking of more stuff
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?
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.
Damn Scott. Can I get a little lovin here, lol!
I know for sure that NGL and FDLIC do NOT allow Flex Pay. It is on the application but I just came back from a conference in WI and everything discussed there (NGL and FDLIC both) did not have flex pay.
There is however a new "Family Trust" through NGL that you can put up to $50,000 and once it passes the 5yr. Mark your good to go.
BUt you gotta remember that Medcaid Law is dependent upon the state. The lady I am working with now is maxing out a funeral trust on all her children, if she does not then it will go to the nursing home. ONce she passes, the funeral trust on her children cannot be touched.
I was trying to make an easy fix by saying put it in the childrens name, but that option is better than putting it in someone who is in the nursing home and losing it.
If you have specific knowlege that they are going onto Medicaid, then by all means, don't sell them a whole-life policy of any kind UNLESS you can find a funeral home that will accept an irrevocable assignment of it.
If you are just assuming they MAY go on Medicaid someday, you shouldn't have to get a disclosure any more than a bank would if she put money in a savings account.
That being said, Forethought actually has that disclosure form available but I think it's because a lot of people ALWAYS think of Forethought policies being exempt from nursing homes because they are so well known in the pre-need funeral side of things.
Originally Posted by 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?
- - - - - - - - - - - - - - - - - -
NGL and FDLIC both have multi-pay as well as single pay contracts. I have them right here. I don't know why funeraltrustdotcom only makes the single pay and 12-month pay versions available. Maybe just to keep it simple to understand and to separate it from final expense insurance.
I do think the family trust policies with the 5-year waiting period could possibly be a real good thing in some estate planning situations.
Setting up irrevocable funeral trusts for multiple family members from someone's Medicaid spend down money is OK in states that allow it. Indiana does (or did last time I know of.) It won't fly in Kentucky at all. There's no easy way to know which states allow it and which don't other than watch for a lawsuit and see which way it goes.
I personally would never go beyond the Medicaid applicant and their spouse. The only exception I've had to that was a family that came to me with advice from their attorney to set up a dozen of them. I spoke with the attorney personally and documented that the family was acting on his advice. He was protecting millions of dollars for them and grandpa was going to pay his own way for at least 5-years.
I know personally of a lawsuit in Indiana where Medicaid sued a family and the agent and the insurance company (you know the one- starts with an F) over the family had about $90,000 and spent it all down buying single-pay funeral trusts for many family members and their spouses and got Grandma on Medicaid real quick. Medicaid lost the suit and appealed it and lost that too.
Indiana has a real weird law where all funeral preplans HAVE to be irrevocable even if the person is not going on Medicaid. That's what screwed the Medicaid system from getting any recovery.
In Kentucky it's the opposite. No funeral trusts in Kentucky are irrevocable EVER until the person it covers actually applies for Medicaid. That stops such things from happening because if you pay a funeral trust for junior with Grandma's money, the money is recoverable because Junior's is NOT irrevocable no matter WHAT was signed.
As a taxpayer, I think Kentucky's law makes a lot more sense.
In Georgia, (at least a few years ago), they didn't recognize irrevocable funeral trusts at all. What they DID allow was ANY life insurance policies with a death benefit of $10,000 or less to be exempt from Medicaid and you could have as many of them as you wanted. It was crazy but if someone had $100,000 and was going in a nursing home, they could buy 10- single pay whole life policies for $9,999 each and make anyone they wanted as the beneficiary and they could qualify for Medicaid the next day. I THINK they changed that law a few years ago.
If the politicians had ANY sense at all, they would talk to states that have it figured out before they pass their own stupid laws that don't make sense and can be easily abused. Medicaid has been too easily abused and continues to be.
All this is my opinions from my personal experiences. I am definitely NOT a lawyer. Here's my legal disclaimer: 50% of what I say on this forum is BS and the other half I honestly believe but it's probably wrong too.
Originally Posted by theinuranceguy
Damn Scott. Can I get a little lovin here, lol!
I know for sure that NGL and FDLIC do NOT allow Flex Pay. It is on the application but I just came back from a conference in WI and everything discussed there (NGL and FDLIC both) did not have flex pay.
There is however a new "Family Trust" through NGL that you can put up to $50,000 and once it passes the 5yr. Mark your good to go.
BUt you gotta remember that Medcaid Law is dependent upon the state. The lady I am working with now is maxing out a funeral trust on all her children, if she does not then it will go to the nursing home. ONce she passes, the funeral trust on her children cannot be touched.
I was trying to make an easy fix by saying put it in the childrens name, but that option is better than putting it in someone who is in the nursing home and losing it.
Last edited by Newby : 11-16-2008 at 07:08 PM.
Reason: Automerged Doublepost
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"!
I think the comment has already been made that you can't be held responsible for every "what if..." that may or may not occur.
I'll be real blunt here: When the client is dead, he is not going to complain to you that he didn't know his DB would be reduced. The survivor(s) that read about it at that time will understand that he did the best he could to protect them from his final expenses. As an agent, I am not going to deprive my client of this desire.
I think it is required to know the laws of your state, and if there are reasonable exposures to losses that would make the policy unsuitable, then by all means, discuss this with the client. But to try to cover every conceivable issue is like trying to nail jello to the wall. He will end up buying so much insurance to cover this risk or that, that he will spend down his assets before his time!
I have been selling this type of policy since 1988 and in 20 years, I do not ever remember getting all concerned about medicaid spend -down. You are way over-thinking this. The cash values are not what you are selling, you are selling coverage for a funeral, basically. If you do not like selling whole life to folks to cover their final expenses, I may suggest that you do not sell it, then. Sell term life to younger folks, maybe. Pick a field that you like.
I am not saying you are doing right or wrong by FE, just saying if you have to think about it this much, maybe it's not the correct field you need to be in. Maybe pick one that you have less reservations about.
Last edited by HomeService : 11-17-2008 at 02:21 AM.
Looks like those who are in final expenses are in a growth business:
Big business in boomer deaths
By [COLOR=#0066cc]Boomer Market Advisor[/COLOR] | Published December 1, 2008 From the [COLOR=#0066cc]December 2008 Issue[/COLOR] of Boomer Market Advisor Magazine
Sounds morbid, but funeral directors are “just sort of waiting for the baby boomers to start dying off.” Tara Olson, owner of AllPoints Research, a marketing research firm that has worked with funeral homes to develop business plans, tells the Associated Press funeral directors are “looking forward to boom times.” These “boom times” will mean $11 billion (yes, billion) annually for funeral homes.
Dan Isard of Phoenix-based The Foresight Companies, which consults with funeral homes, tells the AP he expects the average funeral home to go from serving 120 families a year to 165 before the death rate drops again around 2040. The death rate of about 8.1 per 1,000 people is expected to go up in the next decade.
Final Expense Insurance
Linear Mode
