When considering sources of funding for assisted living, many people do not realize that converting a life insurance policy into a Long-Term Benefit Plan is an option. Having the facts before you make a decision will help you understand how the process works so you can be sure that the choice to pay for assisted living with life insurance conversion is right for your family.
What you should know before you decide to pay for assisted living with insurance conversion:
Understanding Life Insurance Conversion
According to Longtermcarebenefitplan.org, a Long Term Care Benefit Plan is the conversion of an in-force life insurance policy into a pre-funded, irrevocable Benefit Account that is professionally administered with payments made monthly on behalf of the individual receiving care. The ability to pay for assisted living with life insurance conversion is a unique financial option for seniors because all health conditions are accepted, and there are no wait periods, no care limitations, no costs to apply, no requirement to be terminally ill, and there are no premium payments.
How it works
The conversion process transfers ownership of the life insurance policy from the original holder to an entity that acts as the benefits administrator. The benefits administrator assumes all responsibility for paying the monthly payments based on the value of the policy. These payments can then be used to pay for long-term care.
Pros:
- You can convert any type of life insurance plan—whole, term or universal.
- There are no monthly premium payments. There also are no application fees.
- Monthly payout amounts are adjustable based on how many months you want to receive payments.
- Because the original owner no longer holds the policy, it won’t count against them in the Medicaid spend-down process.
- A Long-Term Care Benefit Plan can be used to pay for any kind of care—home care, assisted living, skilled nursing, and hospice.
- A separate fund is set aside for funeral expenses.
Cons:
- Monthly payments are paid directly to a long-term care provider, so you must have an immediate need for some form of acceptable long-term care such as assisted living.
- Individuals with smaller policies ($10,000 or less) may be better off keeping their plan, or giving it up in exchange for the cash surrender value. Or, those who have a life insurance policy with large cash value built in (for example, a $100,000 policy with a $90,000 cash value) may be better off taking that cash value.
- It’s important to consider if choosing to pay for assisted living with life insurance conversion makes economic sense for your situation. For example, if your life insurance policy is small, you might be better off keeping it than trying to convert. Or, if the life expectancy of the policy holder is relatively short, and the family can afford to pay for care from another source of funding, it might be wise to do so.
Senior Star’s Assisted Living communities provide our residents with assistance with daily activities only when they need it, and not when they don’t. Assistance includes bathing, dressing, transportation, and medication reminders. Associates are onsite 24/7 and our care plans are personalized to each person’s unique health and wellness needs. What’s more, we offer spacious, modern apartments with safety features for added peace of mind. You’ll find more details about how to pay for assisted living with life insurance conversion as well as other options in our free guide, A Family Guide to Funding Senior Care & Housing.
