What is the Assurance Benefit?
The Assurance Benefit is the exchange of a life insurance policy for a long-term care benefit plan at the time that long-term care needs to be paid. The Assurance Benefit is a unique financial option for seniors:
- No wait periods
- No care limitations
- No costs to apply
- No requirement to be terminally ill
- No premium payments.
Policy owners use their legal right to convert an in-force life insurance policy to enroll in the benefit plan and are able to immediately direct payments to cover their senior housing and long-term care costs.
Converting Life Insurance
Families that need to pay for long-term care often abandon life insurance policies to eliminate premiums or as part of the Medicaid spend down. The Assurance Benefit conversion option is a better choice.
Life insurance is legally recognized as personal property, and the owner has the right to use their asset in a number of ways including converting the policy to a long-term care Assurance Benefit plan while still alive.
Providers of long-term care services such as nursing homes, assisted living communities and home health agencies welcome this alternative form of payment. State governments realize that there is tremendous value to be found by converting life insurance policies to help pay for the costs of long-term care.
Medicaid Qualified Spend Down
Converting a life insurance policy into a long-term care Assurance Benefit plan extends the time a person remains “private pay” before going onto Medicaid. The Assurance Benefit conversion option is considered a “qualified spend down” of a life insurance policy asset for Medicaid eligibility. In 2007 38% of Medicaid applicants owned a life insurance policy that needed to be liquidated to qualify (GAO study).
It is in the better interest of seniors and their family to convert a death benefit into a long-term care benefit, and then apply the maximum private market value of the policy towards their health care needs.
Public/Private Sector Solution
The Assurance Benefit policy conversion is a private sector solution that addresses the financial needs of the senior. It also helps stressed state budgets by extending the spend down period for a senior before they would go onto Medicaid.
States are under tremendous budget pressure to keep pace with exploding demand to cover long-term care needs with tax payer money. They are quickly realizing the savings that can be found by delaying entry onto Medicaid through the use of Medicaid qualified Assurance Benefit conversions.
States have begun passing laws mandating that life insurance companies inform their policyholders that these types of options exist as an alternative to lapsing or surrendering a policy. As Medicaid budgets continue to be pressed, more efforts such as this to find private market solutions will be mandated.
Life Care Assurance Benefit
Life Care Funding Group seems to have the most active Assurance Benefit program. Life Care Funding allows the owner of an in-force life insurance policy to convert their death benefit into a long-term care benefit plan to help cover the costs of Senior Living, Long Term Care, or assisted living. Qualifying for the benefit is uncomplicated and can be done in as little time as one week. This conversion provides a funding bridge and allows seniors to move into a senior living facility right away.
Key benefits of the program include:
- Simple application and review process
- No age or policy size minimum
- No premium payments
- All types of in-force life insurance qualify
- Fixed payments made directly to care provider/facility
- First three months of care paid in advance
- Preserves partial death benefit
- Benefit can stop and start or be adjusted to match changing needs
- SNF, AL, Home Health and Hospice all qualify
Life Care Funding Group
ElderAuthority will continue to research other organizations that provide this benefit.