Cash Value Life Insurance

Long-term care can be one of the biggest financial burdens you or your loved ones face later in life. The good news? Your life insurance policy may already have the solution baked in. (Life Insurance Cash Value for Long-Term Care Expenses)

If you own a cash value life insurance policy—like whole life or indexed universal life (IUL)—you may be able to use that built-up value to help cover long-term care (LTC) expenses in a smart, tax-advantaged way.

Let’s break down how it works and why it matters.

💰 What Is Cash Value Life Insurance?

Cash value life insurance is a permanent policy that includes a savings component. Over time, your policy accumulates value—tax-deferred—that you can access during your lifetime.

This isn’t just about legacy planning. It’s about having access to money when you need it most, including for medical or long-term care needs.

🔑 Why It Matters for Long-Term Care

Here’s the reality:

• 70% of Americans over age 65 will need some form of long-term care.
• Traditional LTC insurance can be expensive and hard to qualify for later in life.
• Many families are unprepared and end up paying out-of-pocket or draining assets.

Using a cash value life insurance policy offers a flexible alternative to plan ahead and cover long-term care costs without selling assets, pulling from retirement accounts, or putting financial pressure on loved ones.

✅ 4 Ways Life Insurance Cash Value Can Help Cover LTC Costs

Here are the most common (and creative) ways to use your policy to pay for long-term care:

1. Access the Cash Value Through Policy Loans or Withdrawals

If you’ve built up substantial cash value, you can borrow against your policy or withdraw funds to help pay for:

• In-home care
• Assisted living
• Nursing home expenses
• Home modifications

Pro Tip: Loans are tax-free if structured properly and don’t require repayment during your lifetime (they’re simply deducted from your death benefit later).

2. Add a Long-Term Care Rider

Some life insurance policies allow you to add a LTC rider. This lets you tap into your death benefit early if you’re diagnosed with a chronic illness or need long-term care.

What it means: Instead of waiting until death to benefit from your policy, you can use the funds while you’re alive and need care most.

3. Exchange an Old Policy for a New Hybrid Life + LTC Policy (Tax-Free)

Got an old policy you’re not using?

Under IRS Section 1035, you can exchange a life insurance policy for one that includes long-term care coverage, with no immediate tax consequences.

This lets you upgrade your protection without losing the value you’ve built.

4. Supplement Traditional LTC Insurance

Cash value life insurance gives you a backup bucket of money if your traditional LTC policy doesn’t cover all expenses or runs out.

Even if you’re healthy today, having multiple funding sources in retirement is a smart move.

🔍 Real-Life Scenario

Meet Greg, age 62. He’s owned an IUL for 15 years and has built up $150,000 in cash value. When he needs part-time in-home care after a surgery, he takes a $25,000 policy loan, tax-free, instead of tapping into his 401(k).

He gets the care he needs, keeps his retirement plan intact, and still maintains life insurance protection for his family.

🧠 What to Consider

Before using your cash value:

• Check the loan terms and interest rate.
• Make sure it won’t cause your policy to lapse.
• Consult a licensed expert to avoid tax traps or missed opportunities.

🛠️ The Policy Shop Can Help You Plan Smart

Whether you want to build cash value, add a LTC rider, or exchange a policy, we can guide you step by step.

📞 Schedule your FREE consultation today to explore how your life insurance can double as a powerful long-term care funding strategy.