Caring for someone with dementia often comes with overwhelming emotional and financial challenges. Families frequently find themselves balancing the rising cost of long-term care with limited resources. Using a life settlement to cover dementia care costs can provide much needed financial relief, turning an existing life insurance policy into funds that directly support patient needs. Life settlements can provide a way to afford quality care without sacrificing other family assets.
The Financial Burden of Dementia Care
Dementia care is among the most expensive forms of long-term care. According to national studies, the costs can exceed $5,000 to $8,000 per month for memory care facilities. In home care often cost just as much when specialized care is required. Medicare coverage is limited, and while Medicaid may help, it often requires families to “spend down” assets first. This leaves many patients and their loved ones searching for alternatives that allow them to access funds without depleting savings or retirement accounts.
What Is a Life Settlement?
A life settlement is the sale of an existing life insurance policy to a third-party buyer. In exchange, the policyholder receives a cash payment that is typically far greater than the policy’s surrender value, but less than the death benefit. The buyer takes over premium payments and receives the death benefit when the insured passes away.
For dementia patients and their families, this option creates immediate liquidity. Instead of continuing to pay premiums on a policy that may no longer fit their financial goals, they can redirect the value of the policy toward urgent care needs.
Why Dementia Patients May Qualify
Dementia, particularly in its advanced stages, is a progressive condition that often makes patients eligible for a life settlement. Buyers evaluate policies based on factors such as:
- Life expectancy – Advanced dementia can shorten life expectancy, which makes policies more attractive to buyers as a return on investment may be realized sooner.
- Policy type and size – Larger policies, especially guaranteed universal life policies, often yield higher offers. Some term policies may also qualify for a term life insurance settlement if they are still convertible.
- Premium costs – Lower ongoing premiums generally make a policy more valuable to life settlement buyers.
Eligibility depends on a combination of health factors and policy details, so each case is reviewed individually. If you aren’t sure whether your policy qualifies, it is always best to ask, so please just give us a call.
How Funds Can Be Used
One of the main benefits of using a life settlement to cover dementia care costs is flexibility. Unlike Medicaid or certain government programs, there are no restrictions on how the funds must be used. Families caring for someone with dementia often put the proceeds toward:
- Memory care facility costs
- In-home caregiving services
- Respite care for family caregivers
- Medical bills or prescription expenses
- Home modification to improve safety and accessibility
This flexibility allows families to adapt to the evolving needs of dementia care, which often change as the disease progresses.
Comparing Alternatives
Families exploring options to fund dementia care may also consider:
- Reverse mortgages – Can provide cash but reduce home equity.
- Long-term care insurance – Only helps if a policy was purchased years in advance.
- Borrowing against the policy – Provides some funds, but does not unlock the full value of the death benefit. Always get a policy appraisal so that you know the potential value of your policy in the secondary market for life insurance before proceeding with a policy loan or surrender.
Compared to these, a life settlement can often generate a much larger immediate payout, especially if the policyholder no longer needs to maintain coverage for beneficiaries.
Important Considerations
While life settlements can be a valuable tool, families should carefully evaluate:
- Tax implications – Life settlement proceeds may be taxable depending on circumstances. For those with a shorter life expectancy who qualify for a viatical settlement, proceeds are typically not taxed.
- Impact on benefits – Receiving a large cash payment can affect Medicaid eligibility.
- Loss of death benefit – Beneficiaries will no longer receive the policy’s payout.
Because dementia is a condition that requires long-term planning, families should weigh these factors alongside the immediate benefits of having cash available for care.
Accessing Funds for Dementia Care
The cost of dementia care can place a heavy financial strain on families. By using a life settlement to cover dementia care costs, policyholders can turn an existing life insurance policy into an immediate source of funding. This option provides flexibility, access to quality care, and relief from ongoing premium obligations.
In a short 5-10 minute phone call, find out if accessing cash from an existing life insurance policy to pay for dementia care is an option for you. To learn if you or your loved one qualifies, please give us a call at 800-727-7654.
Do You Qualify?