Long-Term Care Insurance

With advancements in healthcare, Americans are living longer than ever these days, which is great. But it also presents a financial challenge for those who are unprepared for the rising costs of long-term and/or residential elder care. Industry statistics reveal that 70% of all Americans will require some form of care in their lifetimes, but the services are not typically covered under Medicare or any other supplemental plan. Which begs the question, how am I going to pay for it?

Long-term care (LTC) plans emerged to solve this very issue, but when they first emerged, the insurance industry did not know how to price a product that involved the cost of aging. Therefore, people who purchased them are now experiencing double-digit annual rate increases to keep their policies in force. Either that, or they are reducing the benefits in their policy to offset the rate increases. Aside from being very expensive, long-term care plans are a product that you can never be sure you’ll actually need. This makes these policies a prime target for early policyowner cancellation, especially if the aging person’s monthly budget starts getting tight.

For many, a viable solution to the dilemmas associated with purchasing an LTC policy is the use of a life insurance plan that offers a rider that provides Long-Term Care or Chronic Illness benefits. With this type of plan, a policyholder is able to pay for their long-term care by utilizing the provisions built into the death benefit defined in the life insurance policy.

This creates three options for using the life insurance policy. If you live, you potentially have access to the cash values, tax-free. If you die, obviously the face amount of the policy will be paid to your beneficiaries. However, in the event you need care, and can qualify for the rider to kick in, upwards of 80 to 90% of the face amount of the policy will become available as a “living benefit” for the long-term care needs – again, tax free.