Funding Long-Term Care via Life Settlement: A Senior's Guide

The average 65-year-old needs $135,000 set aside for long-term care, with women potentially facing costs exceeding $665,000 over multiple years. Yet most life insurance policies are surrendered or lapsed without ever being offered to the market — leaving real money unclaimed by seniors who needed it most.

A life settlement converts a static asset into liquid capital without requiring the policyholder to purchase anything new. For seniors already facing care costs or expecting them within one to three years, the immediacy of a lump sum is a practical advantage that hybrid products cannot match.

The average life settlement payout of $212,066 can cover approximately the following care durations:

That 20–38 month window gives families time to coordinate Medicaid eligibility, restructure assets, or transition between care settings without depleting retirement savings.

1. 1
   Assess policy eligibility: Gather your policy documents, including face value, type, premium schedule, and cash surrender value. A licensed broker can conduct a preliminary review at no cost.
2. 2
   Engage a licensed broker: Brokers submit your policy to multiple institutional buyers simultaneously. Fees are paid from the proceeds, not out of pocket.
3. 3
   Obtain and compare multiple offers: Never accept the first offer. The spread between lowest and highest bid can be substantial.
4. 4
   Complete medical and policy underwriting: Buyers will request medical records and policy illustrations. This does not affect your health insurance or other coverage.
5. 5
   Receive proceeds and direct to care funding: Once the policy transfer is recorded, proceeds are released from escrow. You can direct funds to any care provider or account.

Critical: Never sign surrender paperwork with your insurance carrier until you have received and reviewed life settlement offers. Once a policy is surrendered, the opportunity to sell it on the secondary market is permanently lost. See our guide on lapse vs. surrender vs. life settlement to understand what each option actually returns.

A life settlement lump sum counts as a countable asset the moment it is received, which can disqualify a senior who was otherwise eligible for Medicaid. Key planning steps include:

• Model the Medicaid impact before closing — work with a Medicaid planning attorney to project how the lump sum affects eligibility.
• Plan the spend-down deliberately — proceeds spent on qualifying care expenses can reduce countable assets without triggering penalties.
• Understand state variability — Medicaid rules differ by state; what applies in Florida may not apply in California or Texas.
• Avoid improper timing — improperly timed lump sums can cause disqualification during critical application windows.
• Coordinate with your full financial picture — life settlement proceeds interact with Social Security, pension income, and other assets.

For a broader comparison of how life settlements stack up against other options, see our guide on Life Settlement Versus Long-Term Care Costs in 2026.