Boomers Cash Out Life Insurance to Pay for Long-Term Care

Through some life settlement products available today, life insurance holders are selling their policies and using the proceeds to finance long term care needs.

One company that offers the option is finding clients who sell their life insurance are using the proceeds—overwhelmingly—to pay for immediate medical or healthcare needs, long term care services or to increase retirement income.

“We’ve seen a steady shift in the use of life settlement proceeds to address healthcare and long term care needs over the past few years,” said Alan Buerger, CEO and co-founder of Coventry. “The downturn of the economy combined with the increase in the number of seniors in need of long term care and rising healthcare costs is a major reason people are selling their policies.”

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More than three quarters, or 77% of those selling their policies in a survey conducted by the company reported using the proceeds for this purpose. Another 14% reported using the proceeds to fund a new life insurance policy or retain a portion of their existing policy without the requirement to pay ongoing premiums.

A recent London Business School report pointed to the trend as suggesting the life settlement products available are improving the situations of life insurance holders lacking other options. 

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“Overall, the evidence suggests that the life settlement market has helped significantly in enhancing the welfare of policy owners who, instead of surrendering, sold their policies in the secondary market,” the authors wrote.

Written by Elizabeth Ecker

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