The costs of long-term care are increasing every year, but most families do not understand what they will be confronting when it is their time to start paying for care. Too many people wait until they are in the midst of a crisis situation before they start trying to figure out how the world of long-term care works. Agents and advisors confront this reality every day.
People want to remain financially independent and in control of their care decisions for as long as possible. People do not want to go onto Medicaid, yet consumers lack awareness and are unprepared for how they are going to cover the costs of Home Care, Assisted Living, Skilled Nursing Care, or Hospice. It is a subject typically ignored until a loved one is in immediate need of care.
Agents and advisors are dedicated to helping clients by finding solutions to their needs and problems. The best way to help families is to provide as much information and access to options as possible. Clients assume advisors are aware of all options in the market that can help them, and expect to be informed so they can make decisions about how to plan and fund their long-term care.
One solution analyzed is the growing use of life insurance policies as a tool to fund long-term care. Did you know that a life insurance policy can be sold and the funds used tax-free to pay for assisted living, home care and all other forms of long-term care? Instead of allowing a policy to lapse or be surrendered, the owner has the legal right to convert the policy into a long-term care benefit plan. The only problem is — despite that fact that millions of people own life insurance, too few people understand their rights as the owner. Life insurance policies are assets. Think of them just like a house. The owner of a house wouldn’t just move out without selling their property. Why should the owner of a policy “move out” without first finding out what the real value of their policy is?
In the midst of growing demand and dwindling resources, it is now all too clear that the long-term care funding crisis has arrived. The problem for America is that most basic of economic principles — supply and demand. The “demand” of seniors that need (or will need) long-term care is growing at a much faster rate than the “supply” of resources (dollars) to pay for their care. This demographic-economic reality has forced the government to reduce benefit levels and raise barriers to entry for the three primary entitlement programs: Social Security, Medicare and Medicaid. The harsh reality is that more of the responsibility to fund retirement and long-term care is being pushed back on the individual (and their family).
Owners of life insurance have been in the dark for years that a policy can be used to pay for senior care. Millions of seniors needlessly abandon life insurance policies in the final years of their lives because they either can no longer afford the premium payments, and/or they are looking at eventually qualifying for Medicaid.
But a little known fact is that it is the legal right of every life insurance policy owner to convert their policy into a long term care benefit plan to pay for senior care. The Supreme Court ruled over 100 years ago that life insurance is personal property and the owner has the same property ownership rights with a policy as they do a home or any other asset. A homeowner would not abandon their home for nothing in return and the owner of a life insurance policy does not need to either. A policy owner has numerous guaranteed rights for the use of their policy including converting the policy into a long-term care benefit plan.
We have reached the point that we can no longer ignore the realities of an ever growing population that will require long-term care, and the diminishing resources to pay for it. People able to sustain themselves with private pay dollars will benefit from access to higher-end senior living environments and care providers, greater choice, more control, and less financial impact on loved ones. Those unable to pay for long term care at some level on their own through the use of savings and assets (such as a long-term care insurance policy or a life insurance policy conversion), or with the assistance of family, will be forced to rely on the government.
New approaches to fund long-term care must be encouraged, and converting life insurance is an option available to all owners of policies. Due to legislative action taken up by national groups like NCOIL and introduced as laws in states across the country, as well as national media attention from news outlets such as The New York Times and The Wall Street Journal fewer and fewer policies will be lapsed or surrendered. Seniors and their families are beginning to learn that life insurance policies they have been abandoning for decades could instead be converted into a benefit to pay for senior care and delay their need to go onto Medicaid.