As many aging Americans grapple with increasing costs of living in retirement, one product has emerged that allows them to borrow against life insurance policies in order to pay for care they may need or avoid falling under financial hardships.
The La Jolla, Calif.-based Life Credit Company says its product is an untapped asset.
The company provides a way for insurance policy holders to borrow against the value via an accelerated death benefit or a “Living Benefit Loan”.
By using their product, consumers can borrow up to 50% of a policy to cope with financial hardships or pay for the care they need later in life. Rather than sell a life insurance benefit for a fraction of the death benefit, Life Credit’s product doesn’t deplete the total value of the policy. Anything that remains after the borrower passes away is given to the heirs.
“To keep pace with rising senior living costs, a growing number of residents are turning to their assets for income,” said Craig Stack, Managing Director of Life Credit Company. “What many seniors don’t know is that their life insurance policy, regardless of type, can be amongst their most valuable of assets. Through our loan program we are empowering seniors to tap into their life insurance policy to help pay for their long-term care expenses.”
For example, a 78 year old male with a $250,000 life insurance policy could receive an $80,000 loan secured by the policy. Upon his death, the loan is repaid using the death benefit proceeds with the remainder going to the policy’s beneficiaries.
After the loan is provided, Life Credit pays makes any required payments to the insurance company and borrowers are charged an interest rate. All of this is added to the balance of the loan and must be paid off prior to the beneficiaries receiving any money.
The company estimates that one third of senior living residents have some form of life insurance.
Written by John Yedinak