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Life Insurance With Long-Term Care Benefits: Is It Right For You?

Life Insurance with Long-Term Care Benefits: Is It Right For You?

Life is full of surprises, some good and some bad.  While you always hope for the former, you also have to be prepared for the latter.  This is why we have homeowners insurance to cover burglary or burst pipes, we get auto insurance in case of an accident, and we spring for health insurance to manage the cost of unexpected injury or illness.

Many people also want to ensure that, in the event of their death, their loved ones aren’t left in a lurch, having to pay for end-of-life expenses and other costs out-of-pocket.  This is why we have life insurance policies that will one day help to ease the burden of grieving family members.

What about the cost of medical care that is often necessary later in life?  Sure, there’s health coverage like Medicare and Medicaid, but they don’t account for everything.  What if you need long-term care?  There are policies that cover such care, but you’re already paying for an awful lot of insurance.

The good news is, there are now hybrid policies that pair long-term care with permanent life insurance, such as universal or whole life policies.  How do these bundles work and what can you expect when you choose combination coverage?

The Basics of Hybrid Policies

The problem with many insurance policies is that you might end up putting in tons of money and getting nothing back.  You may never suffer an auto accident or damage to your home that requires insurance to cover a major expenditure, for example.

When it comes to a long-term care policy, you might wonder if paying is worth it, especially if you have good health coverage and a family support system in place.  Life insurance with long-term care takes away the worry that your payments may be a waste of money.

It not only provides for long-term health benefits not included under Medicare or typical health insurance policies, but it offers the alternative of life insurance benefits that go to a beneficiary in the event of your death.  Even if you use coverage for long-term care, there could still be some payout on the insurance if you fail to max out your care benefits.  Some policies guarantee a small percentage (say 10%) of the full death benefit, even if you do max out long-term coverage.

How do you pay for these policies?  There is the option to make a lump-sum payment, but it could be tens of thousands of dollars.  Most people pay annual premiums until they meet the set payment amount for the policy.

Even though these hybrid policies are expensive, the payout is much greater.  The cost of covered long-term care could far exceed what you pay in, and the full death benefit is larger than the sticker price of the policy (although it won’t equal the amount you’ll receive in long-term care benefits).  Like many life insurance policies, you’ll have to answer a health questionnaire to qualify, and you may have to submit to a medical exam.

Potential Benefits

The main benefit of a hybrid policy is pretty obvious – you can have your cake and eat it, too, so to speak.  If you need long-term care that is not covered by other health insurance, this policy will foot the bill, up to a certain amount, often several times what you pay for the policy itself.

If you don’t use the benefits, your named beneficiary will get the money you put in, plus extra on top (although not significantly more).  Even if you use long-term care benefits, some policies will still pay out death benefits.

If you decide at some point you no longer want the policy and you haven’t used any of the care benefits, some policies allow you to withdraw the money you put in (generally within a set number of years after purchasing the policy).  In other words, the right policies are an investment guaranteed to pay off in one way or another.

Potential Drawbacks

Hybrid policies aren’t right for everyone.  If you only want life insurance, you can find better options for less money, and if you don’t want permanent (whole) life coverage, short-term policies are also going to be cheaper.  The out-of-pocket cost for hybrid policies is high, and not everyone has the money to participate.  However, if you have the money and you want a product that covers long-term care, provides a death benefit, or both, life insurance with long-term care may be the perfect policy for you.

If you or your family member is considering in-home care as part of a plan to age in place, contact Family Matters In-Home Care today for a free consultation.  Our team is dedicated to supporting your family and helping older adults enjoy life in the comfort of their own home for as long as possible.

Some of the services offered by Family Matter In-Home Care include: Alzheimer’s & Dementia CareBed & Wheelchair Transfer AssistanceCompanionshipHousekeeping & Meal PreparationPersonal CareRecovery Care, and Transportation.

Serving the San Francisco Bay Area and Greater San Diego, Family Matter In-Home Care has offices throughout California including: Campbell, CARoseville, CASan Marcos, CA, and San Mateo, CA.

Carol Pardue-Spears

Carol has worked in the healthcare field for more than forty years. As a Certified Nursing Assistant, she worked for El Camino Hospital in the cardiac unit, Los Gatos Community Hospital, The Women’s Cancer Center in Los Gatos and several home health and hospice agencies. Carol founded Family Matters in 2002 to fill a deficit she witnessed in high-quality, in-home services and care.

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