Call Now to Speak with a Care Manager Speak with a Care Manager Now: 203-955-1915

Does Life Insurance Cover the Cost of Home Care?

By , 9:00 am on

Life insurance can do far more than pay for funeral expenses or provide for surviving family members. It can also take care of your elderly loved one while he or she is alive. Seniors who have an active life insurance policy have a few options for paying for care, depending on the type of policy. At the very least, any life insurance policy can be converted into a long-term care plan. Here’s what family members and seniors should know about paying for home care with life insurance.

Accelerated Death Benefits

Available options for paying for care depend on the policy, so the first step is reading the policy thoroughly. If your loved one’s life insurance policy has an Accelerated Death Benefits (ADB) feature, make sure you and your loved one fully understand the requirements. Some policies require meeting specific criteria such as being diagnosed with a life-threatening or terminal condition or being unable to care for oneself. If your elderly loved one meets the requirements, he or she can get an advance on life insurance death benefits. The policy will likely limit how much of this advance can be spent on home care in Fairfield, however the cap can be anywhere from 25 percent to 95 percent of the total death benefit.

If your loved one uses the accelerated death benefit, he or she can get cash to pay for long-term care while still alive but the advance will be deducted from the amount beneficiaries receive after he or she passes away.

Other Options

If the policy does not offer accelerated death benefits, there are two options for paying for home care with life insurance: a life settlement or a viatical settlement. With a life settlement, your loved one can sell the policy for its current cash value. This is usually only an option for people 70 or older and the proceeds will be taxable. Still, he or she can use the proceeds for anything, including home care.

A viatical settlement is similar but it involves selling the policy to a company. Your loved one may qualify for this option if he or she is expected to live for less than two years or has an immediate need for care. This option provides immediate cash, but beneficiaries will not get the death benefit from the life insurance policy upon your loved one’s death. Most companies do allow beneficiaries to retain 5 percent or $5,000 of the death benefit for funeral expenses, however.

Although many seniors wish to age in place, covering the cost of care can be challenging. At Home Care Assistance, we offer flexible part-time home care for seniors in Fairfield, allowing clients to customize a schedule that meets their physical and financial needs. For more information, please call 203-955-1915 and request an in-home consultation.