Alternative Methods of Financing Long Term Care Services:
Terms and Definitions.

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Viatical Settlements | Reverse Equity Mortgage | Notes & Loans

Private Long Term Care Insurance

Basic Operation of a Long Term Care Insurance Contract

In general, a Long Term Care insurance contract operates as an indemnity program for potential nursing home and/or home health care costs. In addition, many policies provide coverage for adult day care, for care delivered in an adult home or in an assisted living facility, and for hospice care.

Some Long Term Care insurance policies are “pure indemnity” programs. These policies will pay the insured the full Daily Benefit Level for which he/she has contracted for each day that the insured receives care. The “pure indemnity” program will pay the full Daily Benefit Level regardless of the amount of care that the insured receives on any given day. Other Long Term Care insurance policies pay for “covered losses.” The “covered loss” policies will pay for the long term care services that the insured actually receives each day, up to the selected Daily Benefit Level. This type of policy is also known as a “pool of money” contract.

Although Long Term Care insurance is available as group coverage, the vast majority of Long Term Care insurance is sold to individual purchasers. Almost all Long Term Care insurance contracts cover skilled, intermediate, and custodial long term care services. You should not consider a contract that does not cover each level of long term care services.

To help you better understand Long Term Care Insurance, elderlifeplanning.com provides you with a step by step guide explaining what long term care is and why you might consider adding this coverage to your financial portfolio. This information will enable you to make an informed decision about whether or not long-term care insurance is right for you.

Click HERE to start your Long Term Care Insurance education!!!

Viatical Settlements

Viatical settlements can provide an alternative source of funding for those who cannot qualify for long term care insurance due to poor health.

But a viatical settlement is not a way to plan ahead for the costs of long term health care.

Instead, viatical settlements are available to help people finance an existing long term care crisis.

A viatical settlement allows a terminally ill person, the viator, to sell his/her life insurance policy - including term or whole life (including an employer group policy) - to a viatical settlement company. The viatical settlement company pays the viator a discounted lump-sum death benefit in exchange for being named the irrevocable beneficiary of the viator’s life insurance policy. The viator is then able to use the settlement proceeds to pay for the costs of long term care, or anything else.

Viatical settlement companies differ as to required life expectancy of the viator and the percent of the viator’s death benefit that they will pay. Thus, coordinating a viatical settlement will involve some comparison shopping.

For viatical settlements to be useful as a means of financing long term care, the viator should have a life insurance policy with a death benefit of at least $100,000. Of course, if the viator is in a financial crisis, any additional funds will be helpful.

To request additional details and information on Viatical Settlements without any cost or obligation, please contact us by going HERE and completing the request form at the bottom of the page.

Reverse Equity Mortgage

Reverse Mortgages are another alternative that allow the elderly to convert a portion of their home equity into an income flow, while permitting them to continue to live in their home and maintain financial independence. In addition, the burden on government support of the elderly is reduced (if not eliminated), at least relative to what it would be without the Reverse Mortgage.

The Note and Loan Agreement

According to attorney Johnston deF. Whitman, Jr., the easiest way to understand Reverse Mortgages is to focus on the fact that there is only one difference between a conventional loan and a Reverse Mortgage - the direction in which the little green pieces of paper flow.

As discussed below, the mode of payment in a Reverse Mortgage (whatever the variation) can simply be described as “the reverse of what you did to create the equity.” As noted above, in a “Reverse” Mortgage, we take those previously deposited pieces of green paper out of the property utilizing the services of a lender who makes a number of installment loans to us over a number of years. The key is that we are, in effect, borrowing our own money. The “Reverse” Mortgage is repaid in a lump sum at the due date.

The method of installment distributions varies with the various types of loans. There are currently four (4) basic types of Reverse Mortgage plans:

• Lump sum;
• Monthly cash in a predetermined amount (sometimes in the form of an annuity);
• A line of credit against which the borrower can draw as desired;
• Combinations of the above.

The loan becomes due when it “matures,” a term of art that depends on the nature of the loan. There can be a number of events causing maturity, the most common being sale of the residence, death of the borrower(s) or a permanent move out of the residence.

Some key points in favor of Reverse Mortgages, and what makes them (or should make them) attractive to the elder / retired / fixed-income population are:

• The borrower’s income is generally irrelevant in qualifying for a loan since the borrower (usually) will not be paying the loan back;
• Obviously, there are no monthly payments for the borrower to make;
• The lender can only look to the security of its loan, i.e. the equity in the property, for repayment.

Thus, in real property law parlance, these loans are “non-recourse.”

Parenthetically, it should be noted that while most of the institutional products are secured by the borrower’s residence, theoretically there is nothing to prevent any piece of real property with equity servicing as the collateral for a Reverse Mortgage transaction.

Long Term Care Purchasing Guide -
FREE to residents of Massachusetts:

• "A Consumer's Guide to Shopping for Long Term Care Insurance in Massachusetts"
• "Questions to Ask and Pitfalls to Avoid when Purchasing Long Term Care Insurance"
• "How to Find an Independent Long Term Care Specialist in Massachusetts."

To order any of these Decision Aids, please select the appropriate option on our Feedback page.

For more details, see our Elder Care page.

Informed Eldercare Decisions, Inc., provides the following services:

• Health, social & functional assessments to determine the services best suited for each individual.
• Care Planning and care management: arranging & monitoring home & community care, assisted living, nursing care facilities & other services.
• Support for family caregivers who live far from their parents or siblings.
• Advisory services to guardians and conservators.
• Counseling and assistance with methods of financing the high cost of long term care including: Long Term Care Insurance, Reverse Mortgages, Life Settlements and other long-term care financing strategies.

Informed Eldercare Decisions, Inc. is a private company dedicated to helping people make the best choices for long term elder care of their relatives. We are Experts in Long Term Care insurance and Elder Care planning.

450 Washington Street, Suite 108, Dedham, MA 02026-0428, USA
Phone 781-461-9637
Fax 781-461-9638