A Story Related to Chronic Illness Riders

Written by Bob Deighton, president of Hybrid Policy Advisor

I wanted to share a great experience I had this week with one of our life insurance clients. The client's sister was calling me to ask about the status of his life insurance policy.

The client purchased a life insurance policy from me about ten years ago and unfortunately has been recently diagnosed with Parkinson’s disease with dementia. His sister has been helping him apply for Medicaid to pay for care at an assisted living facility, and she was calling to find out how much cash value had accumulated in his life insurance policy.

In order to qualify for Medicaid, you can have no more than $2000 worth of assets. You must prove that you have spent virtually all of your assets (including life insurance cash value) before the government will provide assistance with long term care expenses. Because of this, Medicaid is often seen as a ‘last resort’ option for paying for long term care. It provides limited coverage, and unfortunately many assisted living facilities do not accept Medicaid patients.

It turns out that her brother’s $250,000 life insurance policy had accumulated $7,000 in cash value over the last 10 years. So in order to qualify for Medicaid, they would have to surrender the policy and use the $7,000 cash value to go toward his care.

However, there was one critical detail about the policy that she was unaware of. His life insurance policy includes a ‘chronic illness rider’ that allows money to be taken from the death benefit to pay for long term care expenses. Not all life insurance policies have this benefit, and she had no idea that it was included in the policy.

The total amount of benefits that could be drawn against the policy was over $46,000/year for 4 years - a total of over $185,000! Thank God she made that phone call to me! Not only can her brother now have his care covered by his life insurance policy, but the insurance company will also waive the premiums on the policy now that he is collecting the chronic illness benefit.

Needless to say our client’s sister was ecstatic and crying tears of joy. Instead of seeing her brother’s assets go to the government, he was now going to have his life insurance policy come to the rescue and leave his family in much better financial shape than she could have imagined.

I have been in this business for over 30 years and can tell you this was one of the best experiences I can remember in helping a client and their family. Life insurance is not just about having to die to collect on a policy anymore. It can be a tool to help you prepare for the expenses associated with long term care later in life.

If you have any questions about securing long term care coverage on a life insurance policy, give me a call at 1-866-365-6558.


Bob Deighton


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