Has anyone used a life policy conversion to fund long term care?
This is an option I'm just learning about & I'm curious. Any pitfalls? (I've talked to a company that brokers this type of deal, but I am pretty sure they won't share the downside.) Thanks for any advice/experience you might care to share.
For someone who already needs care and doesn't have LTC insurance, it's a great idea to convert their life insurance policy into a stream of income to help pay for the cost of their care.
The problem is that most life insurance policies owned by seniors today have too low of a death benefit. The conversion doesn't generate very much cash flow.
Combination Life and Long Term Care Insurance policies provide long term care benefits if you need long term care or a death benefit if you die without needing long term care; or both. Combination policies provide guaranteed benefits with guaranteed rates (your rates can never be increased). This link provides an example of a Combination policy with Lifetime Benefits:
The Pension Protection Act of 2006 added additional flexibility to Internal Revenue Code 1035. Applying these concepts allows annuity contract owners and life insurance policy owners to purchase a new product by using the money inside of their old products...
Hi Pam and Blannie, yes, I learned about the option via this site. I am hoping someone will chime in with a personal experience. Thanks and happy holidays!
7 Answers
Helpful Newest
First Oldest
First
The problem is that most life insurance policies owned by seniors today have too low of a death benefit. The conversion doesn't generate very much cash flow.
Aaron S. AIF, CFA, MBA
ADVERTISEMENT
Aaron S., AIF, CFA, MBA