Educational note: This article is for general informational purposes only and does not constitute legal, tax, medical, or financial advice. Medicaid rules vary by state. Consult qualified professionals before making decisions.
The Scale of Long-Term Care Costs
Long-term care can be one of the largest expenses of retirement, and costs vary widely by care type and region. Yet most life insurance policies are surrendered or lapsed without ever being offered to the market.
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 soon, a lump sum can be a practical advantage. Not every policy qualifies for a life settlement. Eligibility and outcomes depend on policy characteristics, insured health, premiums, underwriting, and market conditions. Learn more about selling your life insurance policy.
Long-Term Care Costs vs. Life Settlement Proceeds in 2026
Monthly long-term care costs in 2026 vary significantly by care type:
| Care Type | Monthly Cost | Note |
|---|---|---|
| Private nursing home room | $10,798 | Annual costs approach $130,000 |
| Assisted living facility | $6,200 | A 5% year-over-year increase from 2025 |
| Non-medical home care (full time) | ~$5,600 | Based on 40 hours per week |
Care cost figures are national estimates; check current cost-of-care surveys such as Genworth's and your local rates.
To see whether a policy could help cover those costs, compare monthly care expenses against what the policy might bring in a sale. A life settlement may produce more than the policy's cash surrender value, but results vary by case. A free evaluation shows whether a policy may have secondary-market value. Because proceeds depend on the individual policy, estimate with the life settlement calculator or request a life insurance policy review.
How life settlements compare to other funding options
| Funding Option | Key Advantage | Key Limitation |
|---|---|---|
| Life settlement | Lump sum, no further premiums owed, unrestricted use | Heirs lose the death benefit |
| Hybrid life/LTC policy | Dual-purpose coverage | Requires new premiums or lump-sum purchase |
| Traditional LTC insurance | Defined benefit for care | High premiums, use-it-or-lose-it structure |
| Medicaid | Covers broad care costs | Strict asset limits, 5-year look-back |
| Out-of-pocket savings | Full control | Depletes retirement assets quickly |
Key advantages include unrestricted use of funds and premium relief once the policy is sold. Trade-offs include loss of the death benefit for heirs and a possible impact on Medicaid eligibility. For tax questions, see life settlement tax treatment.
Step-by-Step: Accessing Long-Term Care Funding via Life Settlement
- 1Assess policy eligibility: Gather your policy documents, including face value, type, premium schedule, and cash surrender value. A licensed broker can conduct a preliminary review. Qualified submissions may receive a preliminary valuation within approximately 24 hours after sufficient initial information has been received.
- 2Engage a licensed broker: Brokers can present your policy to multiple institutional buyers. Broker compensation is determined case by case, considering the circumstances and economics of each transaction, and is always disclosed before the transaction is finalized. Compensation is structured to support successful transactions while staying transparent with the appropriate parties. Applicable compensation and transaction costs are disclosed in accordance with governing state laws and transaction documentation.
- 3Compare offers: Review every offer received before deciding. Never accept the first offer without comparing alternatives.
- 4Complete medical and policy underwriting: Buyers will request medical records and policy illustrations. Overall timeline varies with underwriting complexity, documentation availability, buyer requirements, and carrier processing. Estimated closing and funding timelines are communicated as the transaction progresses.
- 5Receive 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. No fixed completion date is guaranteed.
Critical: Do not sign surrender paperwork with your insurance carrier until you have reviewed life settlement options. Once a policy is surrendered, the opportunity to sell it on the secondary market is lost. See our guide on lapse vs. surrender vs. life settlement. If you hold a policy with an accelerated benefit rider, also read life settlement vs. accelerated death benefit.
Medicaid Planning Considerations
A life settlement lump sum counts as a countable asset once received, which can affect Medicaid eligibility. 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, subject to your state's rules.
- Understand state variability: Medicaid rules differ by state.
- Avoid improper timing: improperly timed transfers can cause disqualification during look-back windows.
- Coordinate with your full financial picture: proceeds interact with Social Security, pension income, and other assets.
Check eligibility with Medicare.gov's long-term care overview and your state Medicaid office.
Get an Estimate
Fund Your Care With Your Policy's Value
Use our calculator for an illustrative estimate, then connect with our team for a full review. Not every policy qualifies. Actual offers depend on policy characteristics, insured health, premiums, underwriting, and market conditions.
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