CREATIVE PLANNING: LIFE INSURANCE POLICY CAN HELP PAY FOR CARE
By Lisa Rehburg
Healthcare and long term care expenses can be significant as we age. An article in the May edition of The CPA Journal explained that “50% of individuals over age 85 will need assistance with daily functioning because of medical problems (both physical and cognitive), and chronic care at home, in an assisted living facility or in a skilled nursing home, can cost anywhere from $60,000 – $180,000 per year.” In addition, a sample survey of ALCA membership indicates that 50% of clients can afford $2000/month, 30% can afford $5000/month, and 20%+ can afford $10,000/month for products and services related to long term care. Clearly, funding for care is a major issue. But, what is the solution?
One solution that very few people think of is their life insurance policy. Life insurance is an important financial planning tool. Many times, especially as we get older, the reason we purchased the policy 5, 10, 20, or even 30 years ago, is no longer an issue. The house is now paid off; the person has retired and no longer needs the income replacement; a policy purchased for estate tax purposes is no longer needed due to tax reform; a term policy is coming to an end; a business or other asset has been sold; or the policy has become too expensive. Whatever the reason, the policy is no longer needed or wanted.
Life insurance policies can be sold, just like a house. There are investor groups willing to purchase these policies for a lump sum in cash. This process is called a life insurance settlement, and can be an additional healthcare funding source for clients. A life insurance settlement generates, on average, 3 – 5 times the cash surrender value of the policy. Yes, even term policies can be sold! And, life insurance settlements are highly regulated by Departments of Insurance across the country.
An Insurance Studies Institute survey estimates 500,000 seniors a year lapse their life insurance policies, walking away with little to nothing. 90% of surveyed seniors indicated had they known about a life insurance settlement, they would have considered it. Life insurance settlements convert an asset that a client no longer needs or wants, into cash, which can be used for anything…including the cost of care.
To learn more about this topic or individualized care for your loved one, please contact us at Caring With Grace to speak with one of our compassionate experts in family caregiving.
About the Author: Lisa Rehburg is a life insurance settlements broker and has been in the insurance industry for 30 years. More information is also available at www.rehburglifesettlements.com.
This blog is for informational purposes only and does not constitute, nor is it intended to be a substitute for, professional advice, diagnosis, or treatment. Information on this blog does not necessarily reflect official positions of the Aging Life Care Association™and is provided “as is” without warranty. Always consult with a qualified professional with any particular questions you may have regarding your or a family member’s needs.