Monterey, CA Options To Going On Medi-Cal If You Have A Life Insurance Policy : Analysis Of Life Settlement Contracts

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Many senior citizens and their adult children struggle with financial problems when health problems kick in and they require significant in home care.  Although children and other relatives pitch in, it's often times not enough.  Paid in home private duty caregivers often have to be hired by the family, which can be very expensive.  California recently introduced legislation which would have Medi-Cal (called Medicaid in many other states) institute a program which would help those with a life insurance policy pay for in home private duty caregivers, while also saving money for the state.  Many people have life insurance policies but when times get tough, they just stop paying the premiums, which can be a huge mistake (as this Wall Street Journal article points out).  Even if you ask the life insurance policy issuer to give you what is called the cash surrender value which you are entitled to, you end up getting only a fraction of what you or your loved one have paid in over the life of the contract.  Another option you have is to sell the policy to a third party, who then continues to pay the premiums and receives the proceeds from the policy after you or your loved one passes away.  Although you may struggle with the concept of not having anything to leave to your heirs, if you are in the financial position which is going to force you to go on Medi-Cal, you will lose the benefits of the policy anyway (unless you have set up a living trust and the policy is in the trust).  Therefore, what are called "life settlements" may be a viable option for senior citizens that are in a financial pickle due to health problems or the simple fact that they are having mobility problems and they need someone to watch over them in order to be safe at home.  One company in this business told the Journal they paid out, on average, about 45% of the face value of the policy, depending on the age and the health of the policy holder.  Although these intermediaries (which will buy the policy and then resell it to investors) do take hefty fees, it may be worth it to you in the long run.  Most of the states which have passed legislation to facilitate people cashing in on life insurance policies force you to have the money flow into an account which is used only to pay for in home caregivers.  I have not yet read the California bill which is pending, however, apparently this is fairly common.  This is done in order to ensure that the money isn't squandered.  However, if you are the trustee or are taking care of the finances of a parent or are a senior citizen in this situation, you can do this on your own without the assistance of Medi-Cal.  They are implementing the program to drive public awareness of this option which many people aren't aware of.  However, they also have a selfish motive.  If they can get you to tap into your life insurance policy, this will stop you from going on Medi-Cal, at least temporarily.  This will save the state a lot of money because you will be paying for your caregivers, not the state of California.   Although this is not exactly a noble cause, I appreciate the state of California and others which are publicizing this option, because many people simply aren't aware of it and will just let the policy lapse.  In that case, unfortunately, it becomes completely worthless. 

Please note that this blog reflects my personal opinion and may or may not reflect the opinion of Hands to Help Seniors and the individual members comprising the Board of Governors.