Life Insurance with Long Term Care Benefit Riders

by Jeff Rose on August 18, 2016 · 0 comments

life insurance long term care coverageRecent statistics state that roughly 42 million American act as unpaid caregivers.

A recent article cited AARP Public Policy Institute as saying that more than one in eight state residents were providing care to an adult with limitations in his or her activities at any given point in 2009.

People drastically change their lives to accommodate adults who need serious care, often tapping into their own savings and sacrificing time and sometimes even their jobs to be able to help family members in need.

Of course, most do it out of love, but the toll of being a caregiver is tangible.  Caregivers can easily spend tens of thousands of dollars every year caring for a loved one. Doctor’s bills, treatments, special equipment, and more. All of these things add up to a massive bill.  A life insurance policy with a long term care rider can help.

Insurance as a Safeguard

Those with enough foresight to plan for old age and retirement often purchase long-term care insurance, as other forms of payment (self-funding, Medicare and Medicaid) are often prohibitive. If goes without saying that self-funding can quickly eat away at savings, Medicare comes with many restrictions and caveats, and Medicaid is for the indigent.

But many prospective buyers of long-term care insurance were reluctant to spend money on coverage they might not use. As a response, some insurance companies developed insurance products that combined long-term care benefits and life insurance. These linked products can benefit boomers looking to safeguard their savings against the risk of long-term care expenses.

Essentially, how these products work is that they offer your beneficiaries life insurance coverage just like a typical life insurance policy.  The added benefit is that if you were to need long term care coverage, there would be a benefit that would kick in to help pay.

The benefit is dependent on how much premium you paid up front in addition to your age.   Your life insurance death benefit would then be reduced based on how much money you used for long term care coverage.

Is Combination Insurance Right for You?

Obviously, everyone’s situation is different and insurance needs to be considered based on an individual’s needs. Often, combination policies offer enough benefits to give you about 2-3 years of long-term care. But if you need more than a specific period of care, that might not be enough. On the other hand, if you don’t need the long-term care then your heirs would benefit.

You never know what the future is going to hold. While none of us plan to need long-term care, the older we get, the more likely that our health is going to decline to the point that we need extra assistance. Long-term care can be any additional personal assistance that is needed to maintain quality of life as we age. This could be either in a nursing home or in-home care. While most people associate long-term care with a nursing home or assisted living facility, a little over half of all care is given in the patient’s home.A lot of people think that either Medicare or health care will pay for their long-term care expenses. Almost no health insurance plan will pay for any part of long-term care.

Medicare on the other hand, will only pay for up to 100 days of care, after you’ve been admitted to the hospital for three days. There are also several rules and exemptions for Medicare that can quickly become confusing and leave you with massive bills that you have to pay for. While it’s nice to have the Medicare coverage, most patients need more than 100 days, and the bills can quickly add up after that. The majority of life insurance agencies have long-term riders that you can add on to a policy. Other companies offer stand-alone policies that you can purchase if you’re worried about having to pay for long-term care.

Another option for paying for long-term care with your life insurance is including an Accelerated Death Benefits feature. This will allow you to get an advance on your insurance benefit tax-free. These are different from long-term care insurance because you’ll actually be receiving the payout from the insurance policy. With an accelerated death benefits addition, you may have to pay more in monthly premiums, but it’s a great way to utilize your life insurance policy to pay for long-term care.

While there are different accelerated death benefit plans, most of the will allow you to get an advance on the cash if you need long-term care. They will also allow a cash advance if you need to pay for a nursing home or have a life-threatening disease.

Long-term care is expensive. A nursing home can cost as much as $230 per day, equally almost $7,000 every month. That can be a difficult bill for your loved ones to pay for. Instead of carrying the financial strain, or relying on your family to shoulder the bill, there are several ways that you can cover the costs of long-term care without banking your bank.

Before considering any life insurance policy it’s important to get an understanding of what stand-alone policies vs combination policies can do for you. Look at your assets and budget accordingly. Speak with loved ones about your needs, and then when you’re ready, always consult with a qualified adviser.

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