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Life Care Assurance Benefit Plan and Paying for Eldercare
| Definition |
Qualifications |
Costs |
| Pros & Cons |
Benefit Types & Limits |
How to Apply |
| Overview of Life Insurance Conversion Programs |
||
A Life Insurance Conversion Program is the sale, by the policy holder, of their life insurance to a 3rd party in exchange for monthly payments made to a long term care services provider such as an assisted living residence or home care provider.
A Life Insurance Conversion Program is a new type of program and at the time of writing, there was only a single organization offering the program. The program’s name is the Life Care Funding Assurance Benefit Plan (ABP). In this program, the owner of a life insurance policy sells the policy to a 3rd party for an agreed upon amount. The individual selling the policy does not receive a cash payment but instead the policy buyer makes monthly long term care payments on the policy seller’s behalf.
For example, a policyholder sells their policy for $36,000. They move into an assisted living community that costs $3,000 / month. The policy buyer will pay directly to the assisted living community, the complete cost of care for one year ($3,000 / month x 12 months = $36,000). Should the assisted living resident pass away before the year is complete, there is a preservation of assets clause that will pay out the remainder of the agreed upon amount to a designated individual. The purchaser of the policy takes over payment of monthly premiums and collects the full death benefit value of policy from the life insurance company.
This program is similar to a Life Settlement or a Viatical Settlement, but it is designed for policies of lesser value that typically would not qualify for those options.
The policy would be of no value to the individual were it allowed to lapse and the cash surrender value might be very low relative to the policy amount. By converting the policy into long term care payments, the policy holder is able to get greater economic value from the policy then the cash surrender value and they receive that benefit while they are alive and require care. The other benefit of the Assurance program is that for the duration of the agreement, the family is freed from the administrative tasks of managing the policy and managing payments to their care provider.
The big drawback of a life insurance conversion is that the family does not receive the death benefit from the life insurance and the settlement they do receive is typically between 15% and 50% of the death benefit amount.
Medicaid Eligibility and the Life Care Assurance Benefit
The Life Care Assurance Benefit is considered a countable asset by Medicaid. The proceeds must be spent down to the acceptable amount allowable by the individual’s state before they can qualify for Medicaid. This is an important factor and those considering Medicaid as an option should consult with an eligibility expert prior to making a decision.
For example, a policyholder sells their policy for $36,000. They move into an assisted living community that costs $3,000 / month. The policy buyer will pay directly to the assisted living community, the complete cost of care for one year ($3,000 / month x 12 months = $36,000). Should the assisted living resident pass away before the year is complete, there is a preservation of assets clause that will pay out the remainder of the agreed upon amount to a designated individual. The purchaser of the policy takes over payment of monthly premiums and collects the full death benefit value of policy from the life insurance company.
This program is similar to a Life Settlement or a Viatical Settlement, but it is designed for policies of lesser value that typically would not qualify for those options.
The policy would be of no value to the individual were it allowed to lapse and the cash surrender value might be very low relative to the policy amount. By converting the policy into long term care payments, the policy holder is able to get greater economic value from the policy then the cash surrender value and they receive that benefit while they are alive and require care. The other benefit of the Assurance program is that for the duration of the agreement, the family is freed from the administrative tasks of managing the policy and managing payments to their care provider.
The big drawback of a life insurance conversion is that the family does not receive the death benefit from the life insurance and the settlement they do receive is typically between 15% and 50% of the death benefit amount.
Medicaid Eligibility and the Life Care Assurance Benefit
The Life Care Assurance Benefit is considered a countable asset by Medicaid. The proceeds must be spent down to the acceptable amount allowable by the individual’s state before they can qualify for Medicaid. This is an important factor and those considering Medicaid as an option should consult with an eligibility expert prior to making a decision.
Be Aware That:
The ABP option is designed for older individuals in poor health. Policy holders with long life expectancies or those in good health may be declined as this would require the purchaser of the policy to pay the monthly premiums for an extended period of time.
Age Requirements
There are no declared age restrictions for this program. However, the age of the individual may affect the settlement amount or even cause them to be denied. Older individuals in poor health can expect to receive higher settlement amounts for their policies.
Disabilities / Health Requirements
To participate in the Assurance Benefit Plan program an individual must have a need for ongoing care. Their health status may impact the value of the settlement amount; those in poorer health can expect to receive higher settlement amounts. Generally, individuals with a life expectancy of less than 5 years should qualify.
Family Status
There is no marital status or other family requirements. Since a family exchanging their life insurance policy for care payments does not receive the death benefit from their policy, this option is more appropriate for single individuals or those that do not have dependent children.
Financial Status Requirements
There are no income or assets requirements for the program. Life insurance policies of any value are eligible though policies with at least a $10,000 death benefit are prioritized.
Veteran Status Requirements
Veteran status has no impact on this life insurance conversion program.
Geographic Requirements
There are no geographic requirements; the Life Care Funding Assurance Benefit Plan is available in all 50 states.
Other Life Insurance Requirements
All types of in-force life insurance qualify for this life insurance conversion program including Universal Life, Group Life, Straight Term, Convertible Term and Whole Life.
Types of Benefit Payout
The benefits from the ABP program come in the form of payments made directly to the long term care service providers
Restrictions on How Payout Can be Used
Payments from the Life Care Assurance plan go directly to the long term care service providers, therefore this option can only be used to pay for long term care services such as assisted living, skilled nursing, home health or hospice care.
Benefits Amounts & Limits
There are no hard limits for a life insurance conversion, however typically higher value life insurance policies are sold in a life settlement process in which the policy seller receives a lump cash settlement instead of long term care payments.
Time to Receive Benefits
Four to six weeks are required to process the life insurance exchange and arrange payment with the long term care service providers.
This Source Can Help For
Persons requiring long term care from established and licensed care providers.
There are no fees associated with the Assurance Benefit Plan program. However, when determining the true cost of the program one must consider that participants typically receive 15% - 50% of the death benefit amount. Therefore to determine the true cost of the program, participants must consider the expected lifespan of the policyholder and the monthly premium payment amounts they would be required to make for the remainder of their lives.
Life insurance policy holders that are interested in learning more or applying for the Assurance Benefit Plan program can do so on the organization’s website. Some or all of the following information may be required during the application process:
-Copy of the life insurance policy
-Current policy illustration
-Signed HIPPA authorization
-Life Insurance Information Release Form
-Last 2 years Medical Records
-Proof of Power of Attorney (if necessary)
Visit the Assurance Benefit Plan website to learn more or apply.
-Copy of the life insurance policy
-Current policy illustration
-Signed HIPPA authorization
-Life Insurance Information Release Form
-Last 2 years Medical Records
-Proof of Power of Attorney (if necessary)
Visit the Assurance Benefit Plan website to learn more or apply.
Page Reviewed / Updated Aug. 2012
