FAQs About Paying for Home Care Using Life Insurance Policies

By Pete Lane, 9:00 am on

Many seniors and in-home caregivers struggle with how to pay for home care when it’s needed. While many seniors pay monthly premiums for life insurance, few imagine that this policy could actually help them pay for care while they’re alive. Before letting your policy lapse or turning it in for the small cash surrender value, consider converting your policy to a long-term benefit plan. You may also consider an option called Accelerated Death Benefits (ADB) to pay for care. 

How does life insurance conversion work?

If your life insurance policy is still active, you can convert it into a pre-funded long-term benefit plan. This process transfers ownership from the former policyholder to a benefits administrator. The administrator continues paying the life insurance premiums and then makes monthly payments that can be used to pay for at-home care in Centennial, hospice care, or other health care costs. The monthly payments you receive are based on the value of your life insurance policy. 

Which life insurance policies qualify for conversion?

Any type of life insurance policy can be converted, including term, universal, and whole policies that have no cash value.

What about funeral benefits?

A long-term benefit plan usually reserves 5 percent of your policy’s death benefit or $5,000 as a funeral benefit that will be paid to the account’s beneficiary.

Is the plan Medicaid qualified?

Yes. While a life insurance policy is not a Medicaid-qualified asset, the long-term benefit plan is a Medicaid-qualified asset that will not affect your ability to qualify for Medicaid benefits.

What are Accelerated Death Benefits?

Some life insurance policies have a feature called Accelerated Death Benefits (ADB), which allows you to receive a tax-free advance on your policy’s death benefit while you are alive. This option is a bit more complicated. You may need to pay a higher premium for this feature, although sometimes it’s available at no cost.

There are several types of ADBs. Depending on your policy, you may get an advance on your death benefit if you need long-term care services for an extended amount of time (such as 6 months); you have a life-threatening diagnosis; you have a terminal condition; or you are permanently unable to perform activities of daily living like getting dressed. In most cases, the amount you can receive is capped at 50 percent of your policy’s death benefit.

If you would like to learn more about your long-term home care options, including part-time and live-in care in Centennial, reach out to Home Care Assistance today at 303.957.3100. One of our friendly Care Managers can discuss care options and schedule a free in-home consultation at your earliest consultation.