Assisted-living home partners with life insurance settlement group to help clients pay for accommodations

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by Jill Armentrout | The Saginaw News
Monday March 16, 2009, 11:39 AM
Falling housing values and the recession have left some seniors who want to move into assisted-living centers unable to sell their homes.

Sally Weber, the administrator at Edgewood Assisted Living Center, 4850 Gratiot in Saginaw, said admissions workers are helping clients find funding through life settlements — selling the face value of a life-insurance policy to an institutional buyer, which becomes the owner and beneficiary.

"We’ve talked to seniors who would like to move in but are hesitant and hoping the market would turn around," Weber said. "Not being able to sell their homes is a huge part of the problem. They have too many assets, but they aren’t liquid. They can’t afford payments but don’t qualify for Medicaid with the house."

Life Care Funding Group of Lewiston, Maine, works with residents at more than 1,000 retirement communities to find buyers for the policies. The company has partnered with Heritage Property Management of Grand Haven, which owns the 60-room Edgewood and five other locations in Michigan.

"Seniors are getting hammered by the economy, but they don’t know their life insurance is an asset they can sell if they can’t afford the premiums or don’t need the policy," said Don Poole, chief operating officer for Life Care.

"Often they let them lapse and get nothing or surrender the plan to the insurance company for just pennies on the dollar."

Life Settlement estimates it can pay 20 percent to 40 percent of the policy’s value, compared to 2 percent to 5 percent of the value from a cash surrender.

Within three weeks of introducing life settlements last month, a dozen people had used the service, Weber said.

"We are getting a huge response," she said. "This allows people to move while they are still trying to sell their house."

Using the settlement money to pay for their assisted-living center accommodations allows them to ride out the market when it comes to selling their home.

The U.S. Supreme Court ruled in 1911 that a policy owner can transfer ownership of a life insurance policy without limitations. Life Settlement, which formed a year ago, works with policy holders who are 65 or older and have policies with at least $50,000 death benefits.

"Most settlement companies focus on the big fish, but we founded this company to help smaller guys access money and get the help they need," Poole said. "It’s a funding bridge for them."

The challenge, Poole said, is creating awareness and trust in these options. Working with the assisted living centers helps, he said.

"The long-term care industry is very wary of any perception of conflict of interest," he said. "Heritage Property vetted us and made sure we are licensed. Everything is transparent."

No money changes hands between Life Care and Heritage.

"Most people we talk to don’t do it right away, and it costs them nothing to find out the value of a policy," Poole said. "Sometimes we hear from them later, when they are hurting."

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