New Financial Tools Emerge to Help Seniors Stay at Home

There’s a national movement to facilitate seniors’ desire to remain in their homes, but as many households’ savings dwindle, more products are also coming to the market to facilitate aging in place.

While reverse mortgage volume still remains low in the wake of big bank exits and sluggish home value recovery, one new option has come to the market that has one similar goal of helping people age in their homes. Instead of using home equity, however, it converts life insurance policies into funds that can be used to pay for long term care.

Life Care Funding group is one company working in this vein. In an effort to make more immediate use of the $30 trillion worth of life insurance policies in the United States, according to a white paper written by company Founder Chris Orestis, the company converts life insurance policies into long-term care benefits.

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It’s not the same thing as long-term care insurance, he notes. Rather, it’s converting the death benefit of a life insurance policy into a “living benefit” that, on average, can extend the amount of time seniors can privately pay for their care by about 15 to 18 months, depending on the size of their policy and their care needs.

Traditionally, seniors paid for long-term care by selling their homes or buying long-term care insurance policies, says Orestis. These days, though, with home equity dwindling in the wake of the housing crisis and the long time it takes for homes to sell, converting life insurance policies to long term care benefits could be an option.

Typically, a $100,000 life insurance policy would convert into about $45,000 of long-term care benefits, says Orestis. The policyholder sells their life insurance policy to a third party for an agreed-upon amount. The third party will then make monthly payments for senior care on the policy seller’s behalf, in increments that depend on individual needs.

While reverse mortgages can free up seniors’ monthly cashflow and be used to pay for in-home care, sometimes those proceeds aren’t enough.

Converting life insurance policies into a living benefit is a method that is growing in popularity as a way to help supplement income, says Orestis. It can help keep people at home and is gaining support, he says.

“We’re also seeing a lot of support politically for what we do. Our state has introduced potential legislation requiring that seniors are informed of a program like ours as part of the Medicaid spend-down [and effort to extend private payment].”

Written by Alyssa Gerace