When It’s Too Late for Long-Term Care Insurance, A Life Settlement Could Be the Solution
Consider this: Your loved one has just been diagnosed with Alzheimer’s disease – which is one of the most costly chronic diseases known today.
Due to the difficulty of caring for someone with this type of adverse health condition, many families turn to the professional assistance of skilled nursing homes or home health care providers. This, however, can be expensive.
According to Genworth’s 2014 Cost of Care Survey, the average median daily cost of a private room in a skilled nursing home in 2014 was $240. That equates to more than $87,000 per year. Unfortunately, for those who don’t have long-term care insurance, paying for this type of care out-of-pocket can quickly deplete savings.
So, what are the alternatives?
Unfortunately, Medicare pays very little for long-term care expenses. Even for those who do qualify, this source will only pay for the first 20 days of skilled nursing home facility care in full. For the next 80 days, the patient is required to pay a daily co-payment amount (in 2015) of $157.50. After that, the patient is responsible for all costs.
Medicaid, another government program, does pay for long-term care. However, it requires that an individual be at his or her state’s poverty level before it will pay for care. This means having very low asset and income levels prior to qualification – and gifting away funds in order to qualify is generally not an option.
One source that some families have started to turn to – especially when it’s too late to apply for long-term care insurance – is the funds that may be received from selling an unwanted or unneeded life insurance policy through a life settlement transaction.
How a Life Settlement Works
A life settlement involves selling a life insurance policy for more than its cash surrender value – but less than the amount of its death benefit. In a life settlement transaction, a third party will purchase the life insurance policy and become the new owner and beneficiary of the policy.
This new owner will take over payment of the premiums, and will also receive the death benefit proceeds of the policy upon the death of the insured. In return, the buyer of the policy will purchase the policy for an amount that is oftentimes much greater than the amount of the policy’s cash value – sometimes up to four times as much.
This can provide numerous benefits to the current policy owner, including the ability to:
- Fund medical or long-term care expenses
- Pay off debts
- Stop paying the policy premiums
- Use the funds to supplement retirement income
For those who have a life insurance policy that is no longer needed, and / or if the premiums have become too much to handle, then a life settlement may be an avenue to consider. If you’d like more information on how you could benefit from a life settlement transaction, contact us for additional details.