Whenever I meet with someone to discuss long term care (LTC) insurance, chances are one of these questions will usually come up, “Dan, what if I never use this policy? I will have paid all those premiums for nothing.” Or, “I’m worried about the premium cost increasing, especially when I’m retired.” Both of these are valid questions. Even though the odds are that you will need some type of LTC either when you are older or even as the result of an injury or major surgery, you may be blessed and never require any care your entire life. Certainly, most of us believe it’s never going to happen to me. In regards to premiums increasing, it is a very real concern and we have been seeing increases from some insurance carriers on new and existing policies.
Let’s be honest, LTC is a subject that no one likes to face. After all, the thought of it happening to you is very depressing. But if it does happen to you or a family member it can be one of the most devastating events that occur in your life both emotionally and financially. So when you finally admit that you need to look at the possibility of facing this in the future, the questions mentioned above can be the stumbling blocks that prevent you from putting a plan together.
The rising costs of living are putting pressure on most of us. Insurance that we are required to have like auto, homeowners, and now healthcare are a monthly expense that we have to deal with right now. We believe LTC is long in the future and we’ll probably never need it at all, right? Wrong. Care could be in the future or it could happen next month and we have a far better chance of using that LTC policy than either the auto or homeowners.
A life insurance policy that combines long term care is the solution. Should you need LTC, you can tap into the death benefit amount of the policy. If you never require care in your life, the money is left to your beneficiaries. There is never a concern about the premium increasing because premiums generally do not increase on life insurance policies (term insurance is an exception as it is only meant to be held for a specific period of time).
Currently, policies that combine life and LTC fall into two categories:
1) Asset Based: These use a single premium deposit to purchase a much larger “pool” of LTC money with a life insurance benefit as well. Some insurance carriers provide a “Residual Death Benefit” so that a death benefit will be paid even if all of the LTC dollars have been used.
2) On going premium payment plans. These are more like traditional life plans with a chronic illness rider as an addition. Some carriers charge for the rider which then gives the insured access to the full death benefit amount for living care. Other carriers do not charge for the rider, but instead will discount the death benefit amount should payouts be needed for care. Of course, the balance on any death benefit dollars not used for care would be paid to the beneficiaries as well.
Obviously, there are a number of questions to be answered in putting together a plan for each person which is not meant to be explored here. The goal of this article was to show that you have an option to cover some or all of your long term care needs without the worry of paying into a plan that you will never use, or that will increase in cost at a time when you are less likely to be able to afford such an increase.
In the 2013 spring edition of this publication, we discussed the “Living Benefits” of life insurance. Should you ever need it in the near or distant future, being able to “tap into” the death benefit for your long term care needs just might prove to be the greatest living benefit of any life insurance policy.