In my last article I discussed the escalating costs of nursing home and home health care. Now, I would like you to consider the question – Is traditional long-term care insurance dead? My answer is “No,” but there is a fairly new kid on the block that is getting a lot of attention and maybe you should listen.
Its name is universal life insurance with a long-term care rider. One of the objections to stand-alone long-term care insurance is that it can be expensive and if it is not needed then all of the premiums that have been paid stay with the insurance company, like auto insurance if you never have a claim. This universal life insurance policy is first and foremost a life insurance contract which combines the features of life insurance and long-term care insurance into one policy. The policy’s death benefit can be accelerated to provide benefits to pay for qualified long-term care expenses. The insurance company will reimburse you for those expenses according to the limits of the policy which are set by the owner of the policy prior to issue. If no long-term care expenses are incurred by the insured during their life then their beneficiaries would receive the full death benefit, provided premiums have been paid as illustrated and the contract is still in-force. If the insured used half of the policy face amount for qualified long-term care expenses then the other half would be paid as a death benefit to the beneficiaries.
Life insurance can be an integral part of a financial strategy and can be used for many different reasons in that planning process. For instance, it can be used to provide liquidity for an estate to pay expenses so that valuable assets do not have to be sold which could be subject to real estate or stock market fluctuations.
A long-term care need, especially a lengthy one, can be very costly and jeopardize plans to pass on assets to future generations and again cause the sale of those assets in possible down markets.
The marriage of life insurance and long-term care insurance can address two risks – the risk of dying and the risk of needing long-term care. The great upside is knowing that whatever death benefit amount you choose will either be paid to reimburse your long-term care expenses, or be paid out as death benefit to your heirs, or a combination of both. As long as the contract is in force, then in one way or another the full benefit of the policy will be paid out.
In short, if the premiums for traditional long-term care insurance contracts have you asking “Are there other options?”, and you still would like to cover that risk, and if life insurance fits into your plan as well then you should consider looking into the details of a universal life insurance policy with a long-term care rider.
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