There are ads on television today that are simply terrifying for seniors, informing people that the new health care reform act will virtually eliminate care for seniors or that it will severely limit end of life care. An important thing for all seniors to realize, however, is that this is not the case. The health care reform act will work to make Medicare more efficient, but the aim will be reached by lowering costs and increasing reimbursement to seniors for their policy premiums. Additionally, any insurance plan that you have and are content with will be able to remain in effect. The new act works only to help those without insurance or who are seeking a more affordable insurance policy.
While the scare tactics seem to be working, they are also creating a sense of panic in a group of people with no reason for panic. It is very important to realize that the act does not impose any sort of waiting or weeding out process for needed health or end of life care. While there is some talk of rationing, or determining what procedures are needed and which ones are elective, this is a policy that all insurance companies have used for years and will not be targeted at seniors.
When the health care reform act is enacted, most seniors will notice little change outside of lower or reimbursed premiums. The truth is that you will still receive quality and timely health care and that all needed procedures that were covered before will still be covered. The reform act is not about taking privileges away from anyone, and is designed to help those without insurance and those with too little insurance. Medicare and the new health care program are as committed as ever to prolonging life and to caring for all citizens, and the new bill will do nothing to change this.

“Shares of life insurance settlement provider Life Partners Holdings Inc. (LPHI: News ) went down by over 13% at close of Wednesday’s trading, after an analyst research report called its fees egregious and non-sustainable, and put out a warning to potential investors.”
Citron advised investors to consider carefully as the company had “too many red flags”. The analyst termed the high-level fee of $500 thousands per transaction that was being charged by the company as “egregious” and not “sustainable”.

The report claimed that Life Partners’ gross commissions were 14.4% of the face value of policy settlements in its third quarter that ended on November 30, 2008. But, on an average, the fee is only about 6.0% of the face value or 30% of the gross sale price for such companies.

The report further claimed that investors of life settlements normally seek target of an Internal Rate of Return or IRR’s of 9%-13%, but Life Partners promised as high as a 16% IRR to its investors.

Citron infers, “If Life Partners is forced to cut margins even by half to approach industry norms, its net profit will sink by 63%.” The report concluded that Life Partners sustained their high-level fee income only by “concealment.”

This weekend’s edition of the Wall Street Journal includes a cover story about many 60+ seniors looking for jobs. I have written about this a couple times in my blogs, and “seniors working longer/more” is a story that is covered by the media weekly. What is different about this story is that there is an acknowledgment that while maybe some senors continue to work because they find it rewarding or fun, many seniors are looking for a job out of necessity.

If you, a friend or a loved one is feeling the impact of the stock and housing market drops – share the good news with them. Investors are still making offers on life insurance policies for seniors 65 and older. Don’t expect your life insurance agent or even your financial advisor to recommend – both are discouraged from recommending due to their relationships with the major insurance carriers. Use our calculator for a free life settlement estimate and print it out and bring to your fee-based financial planner.

While entertaining, both Jim Cramer and the writer/publishers of the Motley Fool have made far more money for themselves in books, TV shows and publishing than from money management or investing.

Neither have a strong track record of managing funds and Jim Cramer actually edits his site and his recommended buys and sells to eliminate any accountability to his predictions. Compare that to Jim Jubak of MSN who provides all sorts of tracking and clear buy and sell recommendations – regardless of how profitable they turn out to be 6 months later.

What bothered me recently is coverage of LPHI’s results – one of the only publicly traded Life Settlement companies. They represent buyers of policies and receive a commission of policy face value for their efforts. Motley Fool writer Rick Munarriz says he has a moral problem investing in companies who deal in the life settlement industry as these companies are betting on death.

Shame shame. Life Settlement companies are providing liquidity and incredible value to many senior policy holders. Mr. Munarriz doesn’t seem to understand the company, the industry or the role the industry plays in supporting consumer rights.

The old adage fits: Be wary of men of zeal, well-meaning but without understanding.

When my partners and I first created the Life Settlement Network, and were becoming increasingly involved in the Life Settlement industry, our friends and family had never heard of life settlements.  For the most part, they learned about this new financial tool from us.  Initially – most had responses something along the lines of “Sounds too good to be true”….of course the part left unsaid is – “and it probably is”.

For my more senior family members and friends, the notion that insurance companies would hide and even legislate against this option for seniors was frustrating/infuriating.  Sure – the Life Settlement industry is not perfect, but selling your life insurance in a life settlement still represents a huge benefit for senior policyholders.  Really – the industry needs more awareness and education – both at the policyholder level and for financial advisors.

Since we run a successful Life Settlement company – you can guess how our review of life settlements look.  To help off-set the concerns of those of you with a prudent wariness of things that appear “To good to be true” – lets see what large, reputable, independent 3rd parties have said:

“An incredible 88% of universal-life policies never result in a death benefit being paid. The policies either lapse or are surrendered for their cash value. In both cases, a life settlement may make more sense.” – Time

“Before the life-settlement industry grew, life-insurance companies were the sole buyers of unwanted policies. Now consumers have a choice, and the chance to get more if they cash their policies in.” – the Economist

“The assignability of a life insurance policy is a benefit that a consumer acquires when he or she becomes a policyholder. Life insurance companies are attempting to foreclose the emerging secondary market for life insurance by lobbying for barriers to entry into the market, by boycotting life settlement firms, and in some cases, by preventing their agents from informing policyholders of their right to contract with a life settlement company.” – the Wharton School of Business, University of Pennsylvania

Kiplinger’s, the Wall Street Journal, the New York Times and many others have offered their analysis of the industry and of life settlements – all very favorable.

It really is less about “too good to be true” and more about “what a great opportunity”!

Examples supporting the theory that seniors have been more adversely affected by the economic turmoil more than any other age groups:

• The market crash erased $2.7 trillion in retirement savings
• 16% of seniors 65+ are still working – the highest rate since 1971
• Health care costs are rising 2.5% faster than the rest of the economy

The article also states long-term care insurance is a must but is yet another monthly expense.

Reverse mortgages continue to be an option – but as I said in a previous blog, a last resort option.

If you or a loved one are holding or paying premiums on an unwanted, unneeded or under-performing life insurance policy – don’t surrender it or let it lapse – see its real value by using our on-line calculator to determine whether a life settlement is a better option for you.  Use the funds to offset rising costs and to fund long-term care insurance, donate to your favorite charity or invest in property to leave to your estate.

More positive stories about how investing in life settlements is essential for a diverse portfolio should help to drive more media coverage of the tremendous benefits for senior policyholders as well.  There is uncertainty in the market, and amongst financial professionals who advise their clients that selling their unwanted policy to a 3rd party could have dangerous consequences.  The reality is however, the vast majority of investors are institutional investors buying and trading portfolios of settlements – 200 policies at a time.  The insured’s information is confidential and notification of a passing of an insured is not managed by the investor.

Our opinion is additional regulation of the life settlement industry will add needed confidence and clarity to the settlement process for seniors and their advisors.

This bill would give retirement plan owners 70 1/2 or older more time to take distributions, eliminating the minimum requirement for retirees to sell assets while the market is down.

The affect on the life settlement market is interested and eligible seniors will likely receive higher offers as less seniors turn to settlements as a source of cash.  We make adjustments to our life settlement calculator as necessary to reflect this changing market.

Expect updates to this development in the next couple of weeks.

As if seniors were not already aware, aging can be expensive. In the June 9th, 2008 edition of BusinessWeek, page 11 presents some interesting data on just how much more seniors are spending than the “young” (25 – 34 year olds).

On average:

• Seniors spend more than 4x what the young do on Health Insurance
• Seniors spend almost 3x on Housing Upkeep
• Seniors spend more than 4x on Prescriptions

While seniors spend much less than the young on items such as mortgages, rent and alcohol – the article also cites assisted-living facility costs have risen 25% since 2004, and the annual costs of nursing homes have reached almost $80,000 annually!

Consequently, it is absolutely critical that seniors are aware of all of their financial options including reverse mortgages, long-term care insurance and selling unwanted life insurance policies in senior life settlement transactions.

While “borrowing” against a home in a reverse mortgage has provided many seniors additional funds for necessities, donations or fun; a lesser known and often better financial option is the selling of unwanted life insurance. Eligible seniors can sell their policies for up to 4 times the cash surrender value or more.
Contact your attorney, certified financial planner or CPA, or go to http://www.thelifesettlementnetwork.com/ to find the latest information on senior life settlements. A free life settlement calculator and no-obligation policy submittal tool are also provided.

Know your financial options – and offset the rising costs of a comfortable life.