A little known resource exists for seniors to creatively pay for their long term care services. They can sell their life insurance policy, and fund their health costs with the proceeds. The sale of a life insurance policy is called a life settlement.
CALL (619)564-4873 FOR A FREE APPRAISAL OF YOUR LIFE INSURANCE POLICY
Say you’re 70 years old with a $1 Million guaranteed Universal Life policy. Here’s how it works: An institutional investor, also known as funder or provider, pays you a lump sum (typically 3-5X the surrender value) to purchase the policy from you. Depending on your health and how expensive the premium is, you’ll get anywhere from $50,000 to $500,000 to sell your policy.
The transfer of funds and ownership changes are made in escrow. The provider becomes the new owner, premium payor and beneficiary of your policy. Here’s how they make money. You remain the insured person on the policy. Once you die, they collect the $1 Million death benefit.
You can use settlement money however you like. If that means hiring in-home caregivers or moving into an assisted living home, both are acceptable. The most common life insurance policies settled are term or univeral life policies with a face value over $250,000, with the insured over the age of 65. If there has been a change in health since the policy was issued, that increases the settlement value.
Some caveats about selling your life insurance policy: You should only sell a life insurance policy if you no longer want or need the coverage. For example, if you were to outlive your spouse and have no children, you probably no longer need the coverage. The proceeds are taxable. You’ll want to consult a tax advisor. You may be able to borrow from your policy if it has cash value to pay for long term care costs. If you are terminally ill (one year or less to live by insurance company’s standards), many policies allow you to access up to 25% or 50% of your face value while you’re still living. This would be a more favorable option than settling the policy if you only have a year or less to live.
Also read here about Other Factors to Consider Before Selling Your Life Insurance Policy to pay for long term care costs.
{ 0 comments… add one now }