Thoughts on Long Term Care Insurance

Here are some alternatives.

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Have you considered purchasing Long Term Care (LTC) Insurance, but shied away because of the cost? Perhaps you are as concerned about NOT needing LTC and “wasting” all those premium dollars as you are about needing it. This is a common dilemma. One solution is to use a life insurance product that covers long term care expenses. There are two ways to do this:

1.) An Accelerated Death Benefit (ADB) Rider on your Policy

You will pay an additional premium. Typically the accelerated benefit payment amount is capped at 50 percent of the death benefit, but may be as high as the full death benefit. For ADB policies that cover long term care services, the monthly benefit you can use for nursing home care is typically 2% of the life insurance policy’s face value. If included in the policy, the amount available for home care is typically 1%.

2.) A Hybrid Product

Hybrid products are relatively new and the features are changing as the product evolves, but the concept is that policy benefits will always be paid, in one form or another, prior to death as LTC benefits or after death to your designated beneficiaries. It is easier to qualify for a hybrid product than a typical LTC policy, and certainly less expensive than traditional life insurance plus LTC insurance.

But there are caveats:

  • Payouts for long term care services are more limited than the benefits you could receive from a typical LTC insurance policy.
  • The face value of your life insurance policy may not be enough to permit sufficient payments to cover your long term care needs. The payments could be too low and the duration too short to cover your expenses.
  • These types of riders and policies generally do not offer inflation protection.
  • They do not qualify for the Partnership Program, giving consumers with LTC insurance access to Medicaid under special eligibility rules should LTC coverage be needed beyond what the policies provide.

Always consult an independent life insurance agent. You may be able to convert existing policies into one with a long term care benefit.

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