Life, as they say, is for the living, and the same principle applies for life settlements. But advisors can help clients selling their policy to live a little longer by ensuring their long term care needs will be met.
Depending on personal circumstances, a client may decide that ensuring adequate LTC is more important than providing a benefit for loved ones after death. In that case, a life settlement can play a role in paying for that care.
A number of older insureds are considering just such an option, says Robert Sweeney, a partner with Life Asset Advisors in Buffalo, N.Y.
“At a certain age, it’s more important to have LTC insurance than to have life insurance,” he says. “A lot of people feel that way.”
Many policyholders reach an age where their house has been paid for and their children have grown and no longer rely on them, Sweeney continues, citing himself as an example.
A “core element” of the concept, according to Mark Goldstein, director of advanced markets for Great West Growth Life, is that many individuals who would consider selling a life policy are the same ones who are facing LTC needs.
“There’s a tremendous intersection between those who can benefit from a life settlement and those concerned about LTC,” he says.
Conducting a life settlement and obtaining LTC coverage are two separate transactions, and one should not be affected by the other, Goldstein points out.
A desire to fund LTC, which would be expected to extend the insured’s lifespan, will not affect the settlement process, or the price offered for a policy, Sweeney notes. “They (the funders) don’t care what you do with the funds.”
Sweeney says he often makes presentations to insurance agents and advisors regarding the benefits of life settlements, and he includes information regarding the LTC option in those presentations.
For the agent, using a settlement to fund LTC can provide an opportunity to receive a “double commission,” he notes. Not only would the agent receive a referral commission for the life settlement, he explains, but the agent would also be compensated for placing the LTC policy for the client.