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How Life Settlements Can Help Cover Long-Term Care Expenses for Seniors


For covering health care costs, many seniors in the US rely on Medicare or Medicaid. In fact, approximately 44 million are currently enrolled in the nation’s Medicare program and that number is expected to rise to 79 million by 2030. As for Medicaid, approximately 7.2 million low-income seniors — who are also enrolled in Medicare — rely on the program to cover their medical expenses. Let’s take a look at the differences between the two programs.

Medicare is an insurance program. Medical bills are paid from trust funds which those covered have paid into. It serves people over 65 primarily, whatever their income; and serves younger disabled people and dialysis patients. Patients pay part of costs through deductibles for hospitals and other costs. Small monthly premiums are required for non-hospital coverage. Medicare is a federal program. It is basically the same everywhere in the United States and is run by the Centers for Medicare & Medicaid Services, an agency of the federal government.

Medicaid, on the other hand, is an assistance program. It serves low-income people of every age. Patients usually pay no part of costs for covered medical expenses. A small co-payment is sometimes required. Medicaid is a federal-state program. It varies from state to state. It is run by state and local governments within federal guidelines.

While both Medicare and Medicaid are helpful in covering medical expenses for seniors, neither program is meant to help cover long-term care expenses, which can reach exorbitant amounts. For example, the monthly median cost for an assisted living facility is $4,300, and for a private room in a nursing home facility, the cost averages $8,821. The majority of seniors don’t have the savings to pay these types of monthly expenses for upwards of 20 years. That’s where life settlements come into play.

A life settlement is defined as the sale of an existing life insurance policy for more than its cash surrender value, but less than its net death benefit.

For millions of Americans who own a life insurance policy, letting it “lapse,” or missing a premium payment, means voiding the protection and security gained when you held the policy. Imagine paying into an asset for several years, only to be left with nothing of value if a policy lapses or is no longer worth keeping. There is a solution, however. You can choose a life settlement.

However, there are a few eligibility requirements to be aware of, the most important of which are:


  • Age and health: In general, to qualify for a life settlement, the policyholder should be 65 or older, though younger individuals may still qualify. Specifically, policy owners who are 72 or older and in average health qualify. Those who are 60 or older qualify if they are in below-average health, and those under 60 qualify if they are in critical health.
  • Type of policy: The majority of life insurance policies sold are universal or term policies, though others may still qualify.
  • Premiums: The number of premium payments required to keep the policy in force will play a role as to whether the policy can be sold or not.
  • Death benefit: Also known as the face value, policies with a death benefit of more than $100,000 are usually easier to sell as they are more attractive to an investor.

The amount received from selling a life insurance policy will always be greater than the cash surrender value and less than the death benefit value. The exact amount a policy owner receives, however, will depend on the death benefit of the policy, the annual premiums, the number of years premiums will need to be paid and the rate of return the buyer of the policy (the life settlement company) requires to make the investment.

You should never feel like you have to “settle.” You have an option when it comes to finding value in your life insurance policy. And that value could go a long way in helping to cover long-term care expenses.


About Abacus Life

Abacus Life Settlements has been a leading buyer of life insurance policies in the U.S for the last 16+ years. With over 10$ billion in policy face value purchased, we have helped thousands of clients maximize the value of their life insurance. We provide white-glove services to financial advisors and policy owners. Want to learn about the true value of your Policy? Check out our Market Value Calculator to get a free estimate.


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Zaid Anwar

Author Zaid Anwar

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