No-longer-needed life insurance may hold solution for clients looking for a way to pay for LTC, senior living needs
Millions of seniors needlessly throw away a life insurance policy without realizing it can be used to help them pay for any kind of senior care they want.
An unfortunate reality is that the vast majority of people who own life insurance policies will make premium payments for years, and then as they reach the point they need senior care services will surrender their policy for pennies on the dollar or they will stop paying the premiums and allow it to lapse. Once a life insurance policy is lapsed or surrendered the insurance company will no longer be obligated to pay a death benefit, and there is no way for the policy owner to get it back. This puts billions of dollars of profits into the hands of the big insurance companies — and all at the expense of the people who did the right thing by protecting their families with life insurance policies.
But what if there was a better option than abandoning a policy after making payments on it for years? What if instead, a life insurance policy could be used to pay for senior living and long-term care expenses? Well the good news is that it can. Anyone who owns a life insurance policy and faces an immediate need for senior care could be a candidate to turn their policy into what we call a “Long Term Care Benefit Plan.”
Owners of a life insurance policy have the legal right to use the policy for more than just a death benefit. As insurance professionals know, a life insurance policy is recognized as an asset (just like a home) and it is considered personal property. And just like a home where mortgage payments are made until it is paid off, life insurance policy owners are making premium payments on their life insurance policy.
As they get older and need long-term care, should they just stop making mortgage payments and abandon their home? Of course not, and they shouldn’t do that with their life insurance policy, either. Think of it like this: a Long Term Care Benefit Plan is kind of like a reverse mortgage on a life insurance policy. The owner can access the hidden value of the policy while they are alive and use the money to help pay for any form of senior living and long-term care that they want.
How does it work? The owner of the life insurance policy will sell it for a percentage of the death benefit to a company such as ours, Life Care Funding, and the proceeds are then enrolled into their Long Term Care Benefit Plan. The Benefit Plan itself is an irrevocable, FDIC-insured bank account that protects the money to make sure it will only be spent on senior care services. Because the policy is sold for its present day value and the funds are only used for senior care services, in most cases it is a tax-free event that is recognized as both a Medicaid-qualified spend-down and a VA Aide and Attendance approved benefit plan.
The typical range of present day value that a policy can be converted into in a program such as ours is 20%-60% of the total death benefit. Once a person has enrolled in the Long Term Care Benefit Plan they are no longer responsible for any more premium payments. Because they are private pay, they can choose any form of senior care they want such as Homecare (private-duty or family provided), Assisted Living, Memory Care, Nursing Home Care, and Hospice services. The account is professionally administered and immediately starts making automatic payments on a monthly basis to their care provider of choice. Also, the monthly payments can be adjusted as care needs or care providers change. The Benefit Account will also provide a cash funeral expense payment when the account holder passes away, and if they should pass away with any kind of account surplus left over, it will pass to whoever has been named as the account beneficiary (one or more people).
The Long Term Care Benefit Plan has been helping families pay for senior care services across the United States for years. We created this model to provide an option for middle-class people who are not wealthy enough to pay for long-term care, and not poor enough to qualify for Medicaid.
It can work with any type of life insurance policy with a death benefit of $50,000 or greater – term, whole, UL and group life policies are all eligible. Every senior care service provider in the country accepts payments from the Benefit Plan and thousands of Homecare companies, Assisted Living Communities and Nursing Homes offer this option to families looking for financial assistance. Licensed financial advisors, insurance agents and elder law attorneys in every state use this option with clients who are looking for a way to afford Senior Living and Long Term Care.
Here’s a real life case study example:
A daughter was caring for her father but the turn in the economy had hurt his investments and her own family’s finances. As his condition worsened they were unable to keep up with the costs. He owned a term life policy that they were going to let lapse. They were told about Life Care Funding’s website and called to find out more about how converting the policy would work. Life Care Funding converted it into a Long Term Care Benefit Plan that allowed the family to set up a monthly benefit payment to cover 24-hour in-home skilled nursing care for the remainder of his life.
Policy Size: $250,000
Policy Conversion: $150,000
Monthly Benefit: $10,000
Benefit Duration: 15 months
Funeral Benefit: $5,000
The cost of senior care is expensive and rising every year. People that are private pay are able to choose any form of care they want and always get preferential treatment over those on Medicaid. Converting a life insurance policy into a Long Term Care Benefit Plan is a much better option for a policy owner than abandoning their policy for little or even nothing in return.• Editor’s Note: Is it rare as an agent to come across a client that might be in a situation where this could be an option, or a life settlement might be in order? Is it something you as their agent would explore or potentially recommend, or would you first look into converting to a life/LTCI hybrid?