Houston Estate Planning and Elder Law Attorney Blog
If a couple is thinking that they can sell the long-term care portion of a policy, because their HMO will cover the cost of long-term or skilled nursing care, they need to think again.
All too often, people think that they have found a simple solution to a complicated problem, and then it turns out that it doesn’t work the way they thought it would. To prevent an expensive mistake, speak with an experienced estate planning attorney, before making an expensive mistake.
While there is a market to sell life insurance through what is known as a life settlement, there’s no market for long-term care policies.
A life settlement is the sale of a life insurance policy to a third party. Usually the owner of the policy receives an amount that’s valued at more than the policy's cash surrender value, but less than its face value or death benefit.
nj.com’s recent article asks, “Can I sell my long-term care insurance policy?” The article explains that HMOs typically don’t include the costs of long-term care or skilled nursing care.
However, some people purchase life insurance policies that contain long-term care riders. This type of policy lets the owner tap into the death benefit for long-term care needs. The policy owner may be able to sell this insurance through a life settlement.
When contemplating the sale of your life insurance policy, you should be certain that you don’t need the life insurance for legacy, estate planning needs or income needs.
Remember that HMOs don’t cover any potential needs for skilled nursing care. A person who moves along the continuum of care to an assisted living facility will need the long-term care insurance.
Be sure to look over the policy details. Long-term care insurance policies, once they’re employed, usually no longer require you to pay the premium.
According to the Genworth Cost of Care annual report, the costs for assisted living facilities in New Jersey, for example, can average over $6,000 a month, while nursing homes average $10,600 per month. This is a significant ongoing expense.
A long-term care insurance policy is the best way to pay for skilled assistance to help with the activities of daily living (bathing, toileting, transferring, eating, continence and getting dressed).
Note that Medicare will only pay for care in a skilled facility after a hospital stay, and then only for 100 days.
Reference: nj.com (May 21, 2019) “Can I sell my long-term care insurance policy?”