The State of Florida, which has the highest percentage of residents over the age of 65 of any state in the U.S., just passed an important piece of legislation that will hopefully encourage other states to increase consumer disclosure requirements to protect seniors who are considering making changes to a life insurance policy.
The new law, which worked its way through the state legislature as HB 1077, is a wide-ranging bill designed to combat insurer fraud in Florida. When the House-approved bill was taken up in the Florida Senate, Florida Sen. Jeff Brandes introduced important amendments supported by LISA.
The bill was passed on May 5th and became law in Florida on June 26th, following Gov. Scott’s Signature into law.
Specifically, the law requires that “a life insurer shall provide an individual life insurance policyholder with a statement informing him or her that if he or she is considering making changes in the status of his or her policy, he or she should consult with a licensed insurance or financial advisor.” This disclosure requirement must also advise the policyholder “that he or she may contact the department for more information and include a website address or offer location or manner by which the policyholder may contact the department.”
LISA plans to work with the Florida Office of Insurance Regulation and the Department of Financial Services to develop additional resources for consumer policyholders who are considering making changes to their policy, as well as helpful resources for professional insurance or financial advisors.
For example, there are a number of alternatives to lapsing the policy and surrendering it back to the insurance company that should be considered by seniors and their financial advisors, including:
- Maintain the policy through loans, using the policy or its cash surrender value as collateral.
- Seek an accelerated death benefit.
- Convert the policy to a long-term care health insurance policy.
- Assign the policy to someone else as a gift or to a non-profit organization as a charitable contribution.
- Sell the policy through a life settlement transaction.
Life insurance is personal property, so you can sell it just like any other property you own. Each year, more than $100 billion worth of life insurance owned by Americans over the age of 65 is lapsed or surrendered back to the insurance companies that sold the policies – mostly from a lack of knowledge that an unneeded or unaffordable policy may be sold. Candidates for life settlements are typically aged 70 or older, with a life insurance policy that has a death benefit of more than $100,000, although policies of all sizes owned by seniors of all ages may be sold if there are health problems involved. The sale of a policy can bring you roughly seven times more money than the cash surrender value of your policy.
We believe that consumers have scored a victory in Florida, as they will now be in a position to be informed of a range of options available to them if they own a life insurance policy they no longer need or can afford. This is an important step forward because Florida is often a leader in legislation that especially impacts seniors in America.
As a growing number of financial professionals understand the role of life settlements in the financial planning process, there is a growing chorus of voices calling for more pro-active and transparent disclosures about consumers’ alternatives to surrendering a policy they no longer need or can afford. LISA will continue its efforts to advance legislation and regulation that protects consumers’ rights to know about these alternatives, as well as to promote consumer awareness of the life settlement option in particular.
To learn more about life settlements, how they work and if you’re eligible, call the LISA office at (888) 521-8223 and we’ll be happy to answer your questions about options available to you.