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- My stepfather's dementia caused him to forget to make mortgage payments, which led to eviction for him and my mom.
- He had a $1.5 million life insurance policy, which my mom used as leverage to get a loan for his care.
- My mom's experience convinced me to buy a 20-year, $500,000 term life policy for myself, at $28 a month.
Life insurance was never one of my financial priorities. In fact, if you asked me a couple of years ago, I would have told you that buying a policy was for suckers.
I'm in my 30s. Married, but no kids. Until recently, I figured I had plenty of time to sock away some funds to cushion the blow if anything should happen to me. Why would I need life insurance?
Instead, I put my focus where a lot of young men do: maximizing my earnings, saving what I could, and filling up my retirement accounts.
And I would have gone on like that indefinitely — until the day my mom lost her house.
A life-rattling diagnosis
One October evening, my mom and her husband — my stepfather — went out for dinner and drinks. When they came home, they couldn't get back inside. The locks had been changed. A big "FORECLOSURE NOTICE" was plastered on the door.
My mom was confused. The house was in my stepfather's name, and he'd been steadily making mortgage payments. Or so she thought.
Conversations with the bank would reveal that, actually, my stepfather hadn't made a single payment in more than three years. He'd ignored phone calls, tossed warnings away, and never told my mom a thing.
Digging deeper into her husband's financial life only confused her more. He was a successful business owner. Monthly cash flows would have more than covered the mortgage. As a couple, they had plenty of cash in the bank. Enough to pay the rest of the mortgage off completely.
So why did they suddenly find themselves kicked out of their home? Why wasn't my stepfather making those payments?
It wasn't an accountant or a lawyer who answered these questions for us. It was a neurologist.
After an MRI, the neurologist told us definitively that my stepfather wasn't being malicious. He didn't have any kind of scheme, or a feud with the bank. He had frontotemporal dementia (FTD), a degenerative brain disease that permanently rattled his mind.
My stepfather simply forgot about the payments. Over and over again. For years.
For my mother, this was a heartbreaking diagnosis. It would also turn out to be a very expensive one. Losing their house would only be the beginning of the fiscal complications.
A spouse with dementia is a financial time bomb. FTD is a crippling disease. There is no cure. Patients' brains deteriorate at an unpredictable rate, and there's no telling what cognitive problems will develop along the way. The only certainty for my mother is that, eventually, my stepfather will need 24/7 care in a nursing home. In her area, that costs about $8,000 a month. It's possible he could need that care for years.
That math looks grim, and it would look a whole lot worse if my stepfather didn't have a $1.5 million term life insurance policy.
Life insurance was a financial lifeline for my mother
Though the mortgage had slipped my stepfather's mind, the life insurance premiums were on autopay. The policy was in good standing when my stepfather got his diagnosis. Obviously, my mother couldn't claim the policy while my stepfather was still alive. But that didn't mean the policy couldn't help her.
My mom's financial advisor, Roger Deal, a CPA with Sequoia Wealth Partners in Omaha, Nebraska, pointed out that such a hefty policy gave her some options.
Option one: She could sell the policy to another insurance company for some fraction of its value.
"This usually isn't a great option for people," Deal told me. "The buyer company is going to look over your case with a fine-tooth comb. They'll have their own medical people, and they'll come to a new decision about the insured person's insurability."
Most of the time, that translates to a lowball offer, even for very generous policies.
Option two was more appealing for my mom: Use the policy as leverage to secure a loan from a bank.
"Banks aren't going to look at insurability at all. All they care about is recouping their loan. They'll need proof that the policy is real, and that the insurer is in good financial standing. That's it," Deal explained.
My stepdad's policy in hand, Deal and my mom went to a local bank and secured some much-needed cash to help defray the cost of long-term care. For my mom, this got her some vital breathing room. Though there's no telling how her husband's disease will progress, at least she knows she has the assets to take care of him when the time comes.
My mother's story made me take the leap on a policy for myself
The experience with my stepfather was a wake-up call.
To me, life insurance had always been a little morbid. Maybe I wanted to avoid coming to the conclusion that George Bailey did in "It's a Wonderful Life" — who wants to be worth more dead than alive?
But my mom's encounter made me realize what an asset life insurance can be. Where would my mom be without it? I shudder at the thought. And if I had dementia or some other severe disability, I would never want my wife to have to shoulder the burden of my care.
So I took out a 20-year, $500,000 term life policy. The annual payment of about $340 (which is about $28 a month) is a pittance compared to the peace of mind it gives me.
Frontotemporal dementia is exceedingly rare. But all the same, it's good to know that if it should happen to me, my wife will have options to deal with it.
This article was originally published in December 2019.