Use Your Life Insurance Policy to Pay for Long-Term Care

Leaders from the Long Term Care Industry, Life Settlement Industry, and Law Makers Speak Out in Favor of Using Life Insurance to Pay for Long Term Care

Using your life insurance to pay for long term care is easy, because consumers have the legal right to convert their life insurance’s death benefit into a living benefit that can be used to pay for Long Term Care services. Homecare providers, Assisted Living communities, Nursing Homes, and Geriatric Care Managers across the country have been working with Life Care Funding to educate families for years about this option to help fund Long Term Care needs. Insurance Agents, Financial Advisors, and Life Settlement companies are actively helping policy owners work with Life Care Funding to access this option to convert a life insurance policy instead of lapsing or surrendering it. Political leaders, advocacy groups, and law makers have been working with Life Care Funding to develop and pass consumer protection disclosure laws that have been introduced around the country to make sure policy owners are informed of their rights.

According to Life Care Funding CEO, Chris Orestis: “It’s a secret the life insurance industry has managed to hide for decades: Your policy can be used to pay for long-term health care such as home care, assisted-living, or nursing home expenses. Many people who need long-term care can’t afford it, so they drop the policies they’ve been paying on for years in order to qualify for Medicaid. The life insurance companies profit from the fact that they get all those years of premiums and never have to pay out a death benefit. Instead of abandoning a life policy because your loved one can no longer afford the premiums, policy owners have the option to take the present-day value of the policy while they are still alive and convert it into a Life Care Benefit – Long Term Care Benefit Plan. By converting the policy, a senior will remain in private pay longer and be able to choose the form of care that they want but will be Medicaid-eligible when the benefit is spent down.”

What others are saying about using a life insurance policy to pay for Long Term Care

• “I believe it could be a win for Medicaid service recipients, a win for the fiscal soundness for Medicaid, it could be a win for potential beneficiaries under life insurance policies and I think it could be a win for long-term care service providers,” said Jack McRay, a spokesman for the Florida AARP.
• “Texas is the first state to enact this important legislation to stimulate more private pay dollars by encouraging the conversion of a life insurance policy into a private market Long Term Care Benefit Plan,” said Rep. Rob Damron (KY), “but they are not the only state to recognize the importance of making sure that the owners of a life insurance policy are informed of their right to convert their policy as an alternative to abandoning the policy and going directly onto Medicaid. We introduced this consumer rights legislation in Kentucky and expect passage during next year’s 2014 legislative session.”
• “It saves the state money, because otherwise you would just cash in the value of the life insurance and get $5,000 or something, and go on the Medicaid roll immediately,” Texas Rep. Craig Eiland, a Galveston Democrat who introduced the bill in the Texas House, told the Journal. “The policyholder benefits because he has cash he can direct to his own care and expenditures.”
• “We believe this consumer protection legislation is a win-win solution that will save taxpayer dollars while preserving the funding facilities need for care delivery and maintaining a stable workforce,” FHCA Executive Director, Ed Reed.
• “Right now life insurance policies are being abandoned, so the senior can receive Medicaid. If this consumer disclosure law passed, both the state and the policy holder would benefit. It’s pretty innovative. … It should be a win-win all the way around,” Rep. Jimmy Patronis (R-FL) said.
• “Our goal at Emeritus is to ensure that seniors are properly cared for, and part of that goal is to help families with the financial decisions and details involved in caring for their loved ones,” said Jayne Sallerson, Executive Vice President at Emeritus Senior Living. “Many seniors and families are unaware that their life insurance policies are valuable assets and can be used in this way, and as a result some let active policies lapse. We hope that we can help educate seniors about their resources, so that more seniors can have access to the long term care that they need.”
• “One of the biggest challenges families face when moving into a long term care facility is the monthly expenses. For millions of seniors with a life insurance policy, they now have an option available to convert a portion of the death benefit into a benefit that can cover these costs. The current economic conditions have compounded the problems some families face when it comes to paying for the costs of senior living or long term care. Most people do not realize that a life insurance policy is an asset that they are legally entitled to convert into another form of coverage,” said Ron Aylor, Senior Vice President at Brookdale Senior Living. “The Life Care Benefit Plan gives people a quick and simple option to convert a life insurance policy’s death benefit into a life care benefit and immediately apply it toward covering the costs of long term care residing in a Brookdale community.”
• “This is a private-sector solution to a public policy crisis in our nation today,” adding that “Life settlements have always been pro-consumer, and are now increasingly considered a socially responsible investment. Investors in life settlements are now directly enabling individuals to meet their long term care needs, while helping states offset the growing costs of Medicaid.” Said Alan Buerger, CEO of Coventry First, “This is a new area for life settlements, which have traditionally focused on policies that are larger than the policies in this arena. But the convergence of the long term care needs of seniors, the pressures on long term care providers and the exponential growth of Medicaid spending by States and the Federal government is another opportunity for life settlements to provide value to more and more Americans. We see this as a logical expansion of a maturing life settlement market.”
• “Converting life insurance policies into a Long Term Care Benefit Plan is a Medicaid qualified spend down, it is being written into laws across the country, and all Long Term Care providers the benefit plan as a way to help pay for their services,” said David Kitaen, CLTC, the first Long Term Care Insurance agent in the United States, “The Life Care Benefit is designed to address immediate needs quickly. Advisors need to be informing clients that if they have a life insurance policy they should not abandon them but instead hang onto the policy because they can convert it when they have a need to help pay for assisted living, home healthcare and nursing home care.”
• “This creates a way for individuals to fund some long-term care costs from the proceeds of the sale of their life insurance,” said Lifeline Program President and CEO Wm. Scott Page. “Currently, they have to surrender their policies and receive nothing in return. Under the new law, many individuals will receive thousands of dollars that they can use to pay private medical providers of their choosing for long term care. It’s groundbreaking legislation.”
• “While the features of a Medicaid life settlement might be aimed at smaller policies, their owners, rather than those that are more affluent, represent a large and underserved segment of the population,” said Robin S. Weinberger, CLU, ChFC, CLTC.  “When family members can’t or don’t want to buy the policy, a Medicaid life settlement could provide an important option for these policy owners and, at the same time, benefit the taxpayers who are footing the bill for Medicaid. With all these advantages, it is no wonder more and more states are considering Medicaid life settlement laws. There is one important exception to Revenue Ruling 2009-13, however, which is likely to apply to many Medicaid life settlement transactions. Under IRC Section 101(g), proceeds paid to a terminally or chronically ill insured may qualify as death proceeds and escape taxation entirely.”