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A Breakthrough Way to Fund Chronic Care Expense

Posted by Larry Lupus on April 1 2019 | 3 minute read

Larry Lupus Community Spotlight Chronic Care Expenses
CaraVita Home Care is proud to share the writings of Larry Lupus, the owner of Lupus Financial Services in Cumming, Georgia. He is an expert in finance industry and has provided some helpful information that the senior in your life can use when dealing with financial hardship:

We, the “grown children” whose parents are incurring home care or need to move to Assisted Living Communities, or Memory Care or Independent Living, are worried sick about where the money will come from when the time comes to fund our care. 

We know that currently, 70% of 65-year-olds will need some form of care. And that care could last many months or several years and easily cost tens of thousands, if not several hundreds of thousands of dollars.

Until recently, solutions have been limited to tapping or depleting our life savings, purchasing a long-term care insurance policy, relying on family, or government programs.

Get Your Own Death Benefit Early

Now a fifth source has been created: acquiring a certain new kind of life insurance policy that allows the insured to advance themselves their death benefit early to pay for chronic care expenses. This creates real, meaningful financial relief for those older than 40. 

The idea, generally referred to as “Living Benefits” or “Hybrid” life insurance, makes available an immediate pool of money that a policy owner can tap about ¼ of it per year if he or she is diagnosed with 2 of 6 ADLs or severe cognitive impairment. If the claim is maxed out for four years the face amount of the life insurance policy would get used up, and little to nothing would pay upon death. Easy math: a $250,000 policy would release up to $5,000 per month for a chronic care claim.

This is only for people that can qualify for a new life policy. For people about to go into home care or a community, their only options are savings, government programs or, if they have an existing policy, dealing with life settlement or viatical buyers.

No Strings Attached on How You Use the Money

This money comes tax-free and, with many policies, there are no strings attached to how the money is used. Claimants can use the proceeds for any purpose they see fit including, but not limited to, paying unreimbursed medical expenses, house remodeling, bucket list trips or even paying their daughter to take care of them.

Be Careful Who You Use

Not all life insurance carriers offer this living benefit on their policies. There are many, many details to consider and huge differences from one policy to another. It cannot be emphasized enough to work with an experienced, independent life insurance professional. It's a bad idea to use someone who represents only one company or someone who doesn't sell much life insurance in their practice. Also, a local personal relationship with an agent is better here than dealing with an internet agency. Remember, a person's medical history and situation determine the underwriting classification and therefore the premium cost of a new policy.

Some carriers offer term policies with these benefits, but it's generally better to use a permanent kind of policy such as universal life. A significant sized (say $250,000 or $500,000) term policy is extremely expensive once the initial term period ends or the insured is in their mid-80s or older. After it lapses is when the vast majority of long-term claims would be submitted. Permanent and often called cash value, policies are designed to last until age 100 and beyond.

Changes the Logic

Living benefits have changed the logic and reasons for owning an individual life insurance policy. Whether one lives (and accesses the death benefit for their own needs) or dies (thereby leaving a substantial tax-free death benefit to their loved ones), someone is sure to receive immense financial benefit.

Some companies also offer living benefits for critical illness diagnosis, such as a heart attack, stroke or cancer, and almost all policies allow the insured to take some or most of their death benefit while they live if they are diagnosed with 12 months or less to live. Those calculations differ from chronic care benefits.

Because the total of premiums paid into policies are almost always some fraction of the benefits received, this could make sense for people who have significant life savings. Even single adults with no children could find this to be an efficient, effective way to protect against this risk.


Larry Lupas Headshot Aug 2016Larry Lupas, owner of Lupas Financial Services in Cumming, GA, has been insurance and securities licensed for over 26 years. He is independent and mobile across Metro Atlanta and North Georgia. He will freely and without obligation offer consultations to determine if this is a robust, sensible approach for your situation. He can be reached at 770-205-1076, cell: 678-428-5216 or email at larrylupas@yahoo.com.

Topics: Finances & Budgeting, CaraVita Home Care