Yesterday my Dad called me about an offer he received. Dad is 85, soon to be 86 in March. He is in great health for his age. He goes to the GYM 2 times a week. This man who he sees there a lot, is an insurance agent. He told him about a great deal. He’s going to get him (my Dad) a $1 million Life Insurance policy, and then pay him something like $100k or more. What a deal!
In fact last year, we had an 85th birthday party when Dad turned 85, and one of his friends brought up a similar sounding idea to me that I should investigate. If you have read my bio, you should notice that I too am an insurance agent. Well, this sounded awfully too good to be true to me, so I blocked out even thinking about this until hearing about this again yesterday. So tonight I went on the internet to investigate, and the alarm bells have now begun to go off.
I mean, can you imagine someone purchasing life insurance on an elderly person and then paying the premiums, and also paying the insured? We all know that expression about something being too good to be true. So here is how it works. Let me know what you think. Remember, I have nothing against people making money through legitimate means, or even making lots of it. I want to be one of those making lots of money, but my moral code says to do it honestly and morally.
This is called Stranger Owned Life Insurance or SOLI. Someone buys Life Insurance on someone else’s life, and then pays the premium and pays them for signing up. If approved, the insured must keep the policy for at least two years. After that they can sell it or sign it over to the people who got them involved in this in the first place. Now I am simplifying this, and here is where the potential illegalities lie. First of all, when Life Insurance is bought, the beneficiaries are supposed to have an insurable interest. Like your wife or kids, or now in the modern era, your significant other, if you know what I mean. Or even a business partner. So a total stranger has an insurable interest? Then how about the upfront money? The agent may not tell you, but the proceeds more than likely come from his commission. In most states, this is rebating, and illegal in the insurance business. Two no-no’s. The insurable interest problem is something that can be explained away, because often life insurance is owned for many years, and the people you bought it for to protect may be gone from your life, and after two years, judicial review (previous lawsuit history) has said policies are no longer contestable by the insurance co’s in most situations, and this is one of them.
Now tomorrow I’ll be at a Life Association meeting to discuss this with my peers. I write mostly health insurance, but have a history in the life end of the business too. Sooo, what d’ya think? Let me know. Please also take a look at my insurance blog. Insurancemaven.blogspot.com. I have this article posted there, but have some other items there too.
Wednesday, January 25, 2006
Saturday, January 21, 2006
Long Term Care Insurance 2006
Q)Is there a Long Term Care crisis in America?
A)If it’s not here now it will be soon. The Baby Boom generation begins to turn age 65 in 2011. As it is, Long Term Care is very expensive, and the number one payor, the government, wants ‘out’ as much as possible. As of now 40% of Medicaid payments go towards Nursing Home stays. Prominent Republicans, and now Democrats recognize the importance of having the private sector to pay for the cost of Long Term Care via insurance. Organizations such as the National Association of Health Underwriters, www.nahu.org, have been pursuing the overturning of an amendment by Henry Waxman (D, Ca) that began the prohibition of the Long Term Care Partnership Insurance plans. With the partnership program, if an individual purchases Long Term Care Insurance, and exhausts the benefits of the policy, then they do not have to spend down their assets as they do today. Individuals can maintain on a dollar for dollar basis the amount of assets in their name that the policy was worth. For example, if the policy paid $100k in claims as a maximum benefit, the policy owner could then obtain Medicaid and still have up to 100k in assets to qualify. Democrats did not want this type of program fearing that it would benefit the rich, but now with a looming Long Term Care crisis, they are beginning to recognize the value of this program. Many states now have a partnership program in place in anticipation of federal approval. Even Hilary recognizes this program and has placed her name as a sponsor. After this is passed, the next goal will be approval of an above the line deduction for individual Long Term Care Insurance policies.
A)If it’s not here now it will be soon. The Baby Boom generation begins to turn age 65 in 2011. As it is, Long Term Care is very expensive, and the number one payor, the government, wants ‘out’ as much as possible. As of now 40% of Medicaid payments go towards Nursing Home stays. Prominent Republicans, and now Democrats recognize the importance of having the private sector to pay for the cost of Long Term Care via insurance. Organizations such as the National Association of Health Underwriters, www.nahu.org, have been pursuing the overturning of an amendment by Henry Waxman (D, Ca) that began the prohibition of the Long Term Care Partnership Insurance plans. With the partnership program, if an individual purchases Long Term Care Insurance, and exhausts the benefits of the policy, then they do not have to spend down their assets as they do today. Individuals can maintain on a dollar for dollar basis the amount of assets in their name that the policy was worth. For example, if the policy paid $100k in claims as a maximum benefit, the policy owner could then obtain Medicaid and still have up to 100k in assets to qualify. Democrats did not want this type of program fearing that it would benefit the rich, but now with a looming Long Term Care crisis, they are beginning to recognize the value of this program. Many states now have a partnership program in place in anticipation of federal approval. Even Hilary recognizes this program and has placed her name as a sponsor. After this is passed, the next goal will be approval of an above the line deduction for individual Long Term Care Insurance policies.
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