Reverse mortgages are meant for people who have retired and are above the age of 62. When the baby boomer generation was approaching retirement, the Federal government had launched several financial assistance programs, which would bridge the gap created by the non-payment of wages. A sudden stop of income may have far reaching consequences.
Statistical data implying the need for a reverse mortgage insurance:
Studies reveal that in a lifetime elders need to visit the nursing home at least once and the cost incurred for the same is $150 per day. In the event an individual has a longer stay, the costs would blow up further. One has also to keep inflation in mind. Statistics prove that as of 2002, approximately USD$75 billion or 35% of all medical benefits were due to LTC or Long Term Care of elderly people. A majority of the people fund for their own health care expenses.
It may be mentioned here that during 2002, the state shelled out 43% of the Medicaid costs ($110 billion) whereas the Federal government funded the remaining.
Linking reverse mortgages and LTC insurance:
Reverse mortgage insurance can to some extent make individuals heave a sigh of relief. HUD or Housing and Urban Development passed 2000 the American Homeownership and Economic Opportunity Act. This Act extended the provision of funding Long Term Care by means of reverse mortgages.
As per norms, the proceeds of a reverse mortgage may be used for fulfilling any financial needs of the reverse mortgage borrowers. On the introduction of the new Act, it was proposed that a reverse mortgage program, which was insured by the Federal government like HECM or Home Equity Conversion Mortgage, would extend incentives to borrowers who use the loan amount in buying a Long Term Care insurance policy.
Advantages of reverse mortgage insurance:
The main advantage of reverse mortgage insurance is that it helps elderly borrowers to save their retirement benefits and hard earned money from spending on Long Term Care expenses. The insurance policy may take care of it instead.