Using Life Insurance to Cover Senior Living Costs
Mike McClernonNov 26th, 2020
Financial & Legal Considerations
Assisted Living and Memory Care can be great solutions for many seniors. These senior living solutions are not cheap, though, and many families carefully consider all the ways to pay for this type of senior living. Social Security and pension income of the senior can be used, of course, savings can be accessed, and a house can sometimes be sold to pay for senior living. But sometimes this combination of income and assets is not enough.
One additional solution that very few people think of is their life insurance policy. As we get older, the reason we purchased the policy 5, 10, 20, or even 30 years ago, is often no longer relevant. The house is now paid off, the client does not need the money to pay for end of life debts, inheritances are provided for, the client is retired and no longer needs the income replacement, and, most often, a policy may be too expensive for a senior to continue to pay, to name a few examples. Whatever the reason, the policy is no longer needed or wanted.
Some Life Insurance policies can be sold, just like a house. Some can be sold to pay for significant and immediate health costs, and others can simply be sold like any other asset. There are investor groups willing to purchase these policies for a lump sum in cash. The 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!
An Insurance Studies Institute survey estimates 500,000 seniors a year lapse their life insurance policies, walking away with little to nothing. As income decreases in older age, many seniors just stop paying their Life Insurance Policies. In fact, less than 20% of Life Insurance policies are in force and pay off at death! Ninety Percent of surveyed seniors indicated that 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 Senior Living.
A Word of Caution...
The settlement value will always be less than the value of the policy after a person has passed. Sophisticated advice should be sought to make sure that predeath settlement is the right strategy. For some families, cash, while the senior is still alive, is best. For others, waiting for the policy to conclude and pay off the full value is better. But considering that over 80% of policies never pay off because the premiums are not paid into old age, a settlement can be great if a rarely considered option.
Our company works with an expert in this area, Lisa Rehburg. She recommends that every senior have their policies and their financial goals evaluated by an expert, and that the policies be looked at as an active asset to be maintained and used at the best time for that senior – before or after passing. Here phone number is 714 349 7981, her web page is rehburglifesettlements.com, and her email address is firstname.lastname@example.org. We recommend that every senior investigate this potentially important source of income.