Published on July 20, 2020
Is Cancer Treatment Covered by Life Insurance?
Transcript | Can Life Insurance Pay for Cancer Treatment?
Hello, and welcome to Patient Power. I'm Suzanne Mooney, coming to you from Chicago, Illinois. Today, I'm speaking with Adam Balinsky, the Founder and President of Fifth Season Financial. Adam is joining us from Stamford, Connecticut. Adam, thank you so much for being here today.
It's great to be here. Good morning
Today, we're talking about finances. When someone is diagnosed with cancer, often their first question is, am I going to die? And their next question is, how am I going to pay for this? At Fifth Season Financial, you have a unique program that allows patients with advanced illnesses to leverage their life insurance as an asset. This idea was inspired by a personal experience with your family. Is that right? Would you mind sharing that with us?
Yeah. I'm a Canadian, and my wife's Canadian. We moved to Stamford in 2007. We were used to, I guess what Americans call Medicare for All, or Medicare, in Canada, where everything's covered. About a year after we moved to the United States, my wife actually was diagnosed with breast cancer, and we were panicked. We had no understanding of the US system. I had health coverage, but I was, at that time, involved in life insurance and understood that life insurance policies have value beyond just at the time of death. It got me thinking about, what do people do if they get diagnosed with an advanced illness and have money problems? What are the options they have?
Thankfully for us, my wife was an early-stage situation. She's doing very well now, but that was the impetus for me to think about, this is a real problem, and if we had been in a different circumstance, really, there were very limited options in terms of what would help with day-to-day quality of life. Taking that experience together with my understanding of life insurance and some of the work I had already been doing, I thought that this concept was really novel and should be made available on a broader basis.
Well, thank you so much. I'm so happy to hear that your wife is doing well. And thank you for turning that experience into creating this program that is now helping other people. Will you please explain for our audience what that program is and how it works?
Yeah. We have a program called the FLAG program, which is Funds for Living and Giving. The idea is to get access to money at a point in time when somebody needs it, but to also leave a portion of the life insurance policy for the family. Let me give you a bit of background on how this whole thing developed. What we find is that when somebody gets diagnosed with an advanced illness, so that can be cancer, but it could be any type of advanced illness, lung disease, advanced heart disease, those people, like you say, initially, obviously, focus on their medical situation. But very quickly, they start to realize that there's a cost associated with such a diagnosis. It goes way beyond just medical costs.
Even if somebody has health insurance, what you start to see is, they can experience loss of income due to treatment. They could experience loss of income even if they're the caregiver. So, let's say the primary breadwinner or sick, that person might lose their income because now they're not able to work the same schedule they did before. And also, the person who's taking care of them may stop having access to whatever income they had.
In those situations, which are very, very common, and there's a lot of literature around that right now, the term that's being used is financial toxicity, which refers to sort of the side effect of being diagnosed with an illness that relates to financial. We at Fifth Season looked at this and said, "Well, how are people able to access funds?" What we did is, we divided the help that's out there for patients into different categories. The main category that we saw was not-for-profits. Those are, obviously, foundations, and American Cancer Society, and those types of groups that really do care about these people and are trying to help them with both mental, psychosocial, but also financial.
But when they're talking about financial, they're really only dealing with access to care, access to drugs. There's very, very little help that relates to quality of life, paying for things like, hey, I need to stay in my house, I want to pay my mortgage. I would like to make great family memories and go on a vacation with my whole family, extended family, and make memories that are going to last with those people, while I still can.
What we saw was, for anything beyond the access to that healthcare, the types of dollars available were very low. We're talking $500 grants or little amounts of money, when really what people need are thousands of dollars to maintain a quality of life. We started looking at, well, what are the assets that people have that they don't really know about or understand? Life insurance is very interesting in this context because most people only think about life insurance as being available when the person has passed away.
What we do at Fifth Season is, we look and we say, "Well, if somebody has become ill, their life insurance policy actually could have a lot of value, and they should be able to access that value at the time when they need these funds, and not only after they’ve passed away.” So, there really is, in a traditional way, no access to money that's locked up in the policy.
What we do differently is, instead of looking at the cash value of the life insurance policy, we look at the full value, the face value of the policy. We evaluate a person's medical situation, so we do look at medical records, and we say, "Look, this policy for $100,000, which has no cash value, but this person's ill, actually has real value, and we're prepared to lend against that real value."
So, what we do is, we design a loan that is secured by the life insurance policy. We advance money to the patients so that they can use it however they want up-front, and we also take over the premium payments on the policy. So, we ensure that they no longer have to pay those premium payments so the policy doesn't lapse.
This is a loan, not ... Don't think of it like a car loan or a mortgage, where there's monthly payments. The way these are set up is that there's no payments at all on a current basis. So, you don't have to pay a monthly interest payment or anything like that. The way that the loan works is, ultimately, when the person does pass away, we get repaid from the life insurance policy, and whatever's left of the policy goes back to the family.
Like I said before, it's called FLAG, which is Funds for Living, that's the initial advance now, and the G is for Funds for Giving. What that refers to is, there will be money, or most of the time, so over 90% of the time, there is money left for the family, and that goes to the beneficiaries to use however they wish. Conceptually, that's what we're doing.
What are some of the biggest questions or concerns someone has when they come to you? They're not quite sure how the FLAG program works. I mean, one I would think of off the top of my head is, how do I make sure that there is some money left over for my children? What are some of the common questions or, I guess, roadblocks you might encounter?
Right. No, that's a great question. The first question is trust…They see our advertising on the web or they read reviews about us, and they're looking and saying, "I've never heard of this. I had no idea that I could use my life insurance in this way. This sounds too good to be true." So, we have a real discussion with people about the entire concept from start to finish of how a life insurance policy can have value in the way that we're describing and how you can trust Fifth Season as a lender.
And then, basically, the points that we hit on are, we're a licensed consumer lender. We're licensed with the California Office of Financial Services. We are a licensed lender both in California and Texas, and in other states, there's different legislation that we're complying with. Member of the Better Business Bureau. We've been doing these loans since 2007. So, we have a long track record, I think longer than anyone who's doing any form of loan of the type of that we are.
The second hurdle people have is, they just need to understand, they want to understand how the loan works, soup to nuts, from how much do they get up-front, like you said, how do I know how much my beneficiaries are going to get, and what we pride ourselves on is transparency. We give people full information, and we will show them, at each moment in time, how much the loan balance is, how much surplus there is for the family, and at what point that surplus would go away.
As an example, if somebody comes to us and says, "Look, I have a $100,000 life insurance policy, and I'm dealing with, let's say it's a brain tumor, some type of advanced brain tumor." The first thing we'll do is look at their medical records with our doctors. We'll assess, and we'll say, "Look, we don't know this person individually, but based on the information we have, this is approximately what we think the life expectancy is." That's not information we're sharing with the borrower. That's information that goes into our underwriting decision.
And then what we do is we say, "Look, on your $100,000 policy, we think ... we're prepared to lend you right now $40,000," which means they would get $40,000 in hand to do whatever they want with. Then what would happen is, we would pay the premiums, we would accrue interest on the loan, and we would provide them with an output, which is very straightforward. We would say, "If the person passes away at one year, this is how much interest there would be on the loan. This is how much it would cost to repay the loan out of the proceeds of the policy, and this is what would be left for the family." We do that for every quarter up until there's nothing left.
So, at some point, if somebody outlives very materially, the loan could eat up all of the death benefit of the policy. That happens in seven or 8% of cases, and that's because somebody lived much longer than expected. That's a scenario that we try to make sure that there's money left for the family, but periodically, that doesn't happen. But again, we're up-front, and they know exactly when that point in time would happen.
You are keeping people informed along the way and letting them know, so it's not just a surprise. Like you said, you're letting them know quarterly what is happening.
It's more than that. Before they sign anything, they're getting a statement showing them, at every point in time and every quarter, what would we do and what surplus would be available to the family through to the point where there would be nothing left. In our example before, on $100,000 policy, if we advanced $40,000, maybe at year three and a half or four, the entire death benefit would have been subsumed by the loan.
But typically, in that scenario, when we did our medical review, that person might have had a two-year life expectancy, so we would never expect them to go out that long. But every month they get a statement. If they do the loan, every month they get statements showing the exact place of the loan, what the balance is, and all that type of thing.
If someone is interested, they go to your website, which we can add in the description below this video, and there's an application process. Is there any fee to apply or to find out if they qualify?
There's no fee to apply. There's no fee. Until the documents are signed, there's no commitment. The loan is nonrecourse, which means, even if the person outlived ... If someone has a two-year life expectancy and they live 20 years, there is no personal recourse. The only way we get paid back is through the life insurance policy, which means that they're not at risk beyond the life insurance policy, absent fraud, which ... We're not expecting that.
We've helped over 1,000 families with this type of assistance. We've put out hundreds of millions of dollars, and it really has worked. On our website, we have true testimonials that really are very heartwarming. I mean, we save people from losing their house probably 15 times a year, where they call us up and they say, "I'm about to lose my house. We need to get this done in eight days," which is not a typical timeframe, but that's ... We bend over backwards to make sure these people are getting access to the money at a point in time when they really need it.
Before we wrap up, is there anything else that you want our audience to know about Fifth Season or financial toxicity, or any advice you want to share?
I think the main thing I'd like people to know is that they should learn about all the options that are out there and expand their knowledge base beyond just trying to get money from not-for-profits. There's private sector solutions, like ours, that really are designed for a specific circumstance. If somebody is dealing with an advanced-stage illness, we really are a good option for them to consider. And again, we don't force any obligation, we're completely transparent, and we really feel strongly that the people that we're working with are benefiting immeasurably from the loans that we do.
Wonderful. Thank you so much. If you're listening at home, there are resources out there available for you, whether it's Fifth Season's Funds for Living and Giving, their FLAG program, or another option, there are options out there for you if you need help. Don't assume that you can't afford treatment or that there isn't help out there for you because you're in a certain income bracket or above a certain income bracket. There is help out there available. So, do your research. Ask for help if you need it. Don't be embarrassed to ask for help. Cancer is expensive, and there is help out there.
Adam, thank you again for your time today. And for those of you watching at home, remember, knowledge can be the best medicine of all.
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