Too often seniors who have owned a life insurance policy for many years, which is about to lapse or be surrendered for minimal value, will have contacted their life insurance company to ask about their options. The life insurance company will inform them that they really only have two options if they don’t pay their premium: surrender the policy for its cash value (if it has any) or let it lapse. Most people that receive a lapse notice have no cash value because it has already been drained by the carrier to cover any unpaid premium payments. That typically leaves the final option of “pay or go away”. The number of seniors that allow this to happen to a policy after paying premiums, sometimes for decades, is scandalously high.
Fast Fact: A policy can be converted to a private market long term care benefit account locking up the funds to only be spent on long term care services with the funds being issued monthly by a benefit administrator to the provider of long term care.
On November 19, 2010, during testimony at NCOIL’s annual meeting to consider passing the Consumer Disclosure Model Law, Life Care Funding Group offered the following observation:
“The intersection of a growing senior and Baby Boomer population and economic bust is creating a crisis for how seniors will fund their retirements and eventually long term care expenses. Our case workers hear from seniors and their families every day who have been paying premiums for years and are getting ready to abandon their policy. These are middle class Americans without insurance expertise and the typical size of their policy is well under $500,000. This disclosure law will help consumers understand they have a number of options to consider before discarding a policy, including converting their policy into a long term care benefit plan that holds the potential to address their financial shortfalls.”
Families with the need to pay for long term care that are unable or unwilling to keep their life insurance policy in-force by maintaining premium payments, or are planning to abandon as part of a Medicaid spend down regimen, the Assurance Benefit conversion option is a much better choice.
Visit our White Paper: The Growing Use of Life Insurance Policy Conversions