Using Life Insurance to Cover Long-Term Care Expenses

Nov. 14, 2017

If you need long-term care later in life, do you know how you'll pay for it? If your answer is yes, you are likely in the minority. According to a Forbes article , just 10% of people in the United States have a long-term care plan; while just 8% have purchased long-term care insurance.

Failure to plan can be natural; there is a tendency for most people to underestimate the chances of needing long-term care. However, the U.S. Health and Human Services Department reports that approximately 70 percent of this year's 65-year olds will require long-term care at some point in the future.

What are the Costs of Long-Term Care?

For those without a plan to pay for future long-term care needs, the costs can be devastating. While specific price tags vary depending on the type of care needed and the part of the country you are in, costs can easily run into the tens of thousands of dollars per year. In major metropolitan areas, costs can approach six figures. What's more, one-half of the people who need care need it for more than one year. Of those, the average length of time care is needed is almost four years.

Medicare and health insurance policies will generally not cover long-term care costs, which can leave people in the uncomfortable and unfortunate position of having to watch the assets they've spent a lifetime accumulating being used to pay for nursing home or in-home health care.

For those who plan ahead; however, there are options. These include standalone long-term care insurance policies, life insurance policies with accumulated cash values and hybrid policies that combine long-term care and life insurance features.

Long-Term Care Insurance

Long-term care policies are designed to pay a specified daily amount, subject to policy limits and waiting periods, to pay for care needed to help with activities of daily living, like dressing, bathing and eating. If you qualify to purchase coverage, you can tailor a policy to meet your anticipated needs and your budget by choosing the amount the policy would pay per day and the length of time it would pay for care. Additional benefit riders such as automatic cost-of-living increases may also be available.

When you have this type of insurance coverage, you may not need to spend your own income or use your own assets to pay for care.

Cash Value Life Insurance

If you have a cash value life insurance policy and have been diligent about building up the cash value inside the policy, you may have a significant source of ready and liquid funds that can be used to pay for your long-term care if it is needed, without impacting your current income or retirement accounts.

Be aware that draining the cash value can impact the "health" of the life insurance component of the policy, meaning that you may need to pay more in premiums in later years to keep the policy in force. Your insurance professional can help you understand the options and potential implications of withdrawing your policy's accumulated cash value.

Combination Life Insurance/Long-Term Care Insurance Policies

With a hybrid long-term care and life insurance policy, the insured person has a specified amount of life insurance, just like with a standalone life insurance policy. However, the insured person can access a significant portion of that death benefit amount if long-term care is needed. In the event long-term care is not needed or the death benefit amount is not used up to pay for care, the beneficiary(ies) named on the policy will receive the remainder when the insured person dies.

You may also be interested in exploring combination annuity/long-term care products. These products function like traditional annuities, providing a fixed income that can rise significantly if you need long-term care in the future. Talk to your insurance professional to learn more about how these products work and to discuss whether they might make sense for your situation.

Symmetry Financial Group Can Help You Plan for Whatever the Future Brings

Planning for future long-term care needs now is a gift you are giving your loved ones. However, everyone's situation and needs are different, so there is not a one-size-fits-all solution when it comes to planning for potential future long-term care expenses. At Symmetry Financial Group , we understand this. We work closely with each of our clients so we can make the most appropriate recommendations.

With access to dozens of well-known and highly-rated insurance companies' products, we can shop around to help you find the coverage that will meet your needs and goals. To learn more and to explore options, contact us today online , or call us at (877) 285-5402.


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