- Funding home health or nursing home care with life insurance
- September 5, 2014
Many question if life insurance can really help with home health costs and yes cash is available through policy loans, partial withdrawals of the cash value or outright surrender of the policy according to McGills Life.
Long-term care riders are available with some life insurance policies to provide for home health care or nursing home care needs. In some cases, the rider is available without any additional charge; in other cases there is a nominal charge. In essence, these riders make a portion of the death benefit, usually one or 2 percent of the face value of the policy, available each month that the insured qualifies for the benefit. The subsequent death benefit payable is reduced dollar-for-dollar for each accelerated benefit payment made under these riders.
Their pre-death benefit payments are usually subject to an aggregate limitation of 50 percent of the face value of the policy, although a few insurance companies have increased the aggregate limitation to 70 or 80 percent the policy face value.
Long-term care riders allow life insurance policies to do double duty. They make benefits available for both the insured’s lifetime objective and the survivors objectives. This can create a complication, however, in that lifetime uses directly reduce the residential benefit payable upon death. It is important to recognize and evaluate the potential conflicts when planning for these needs.
The most important conditions to remember when borrowing from life insurance:
• Terminal illness
• A life-threatening diagnosis, such as AIDS
• You need long-term care services for an extended amount of time
• You are permanently confined to a nursing home and incapable of performing Activities of Daily Living (ADL), such as bathing or dressing
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