Tuesday, September 3, 2013

Life insurance as long term care insurance - will it work?

Yesterday when I was talking to my brother he mentioned that he and my SIL had applied for long term care insurance and told me what it would cost them a year if they get approved and go forward with the type of policy they have in mind. We had been discussing whether it made sense to continue to pay for my life insurance now that I have no earned income. Well, our current combined life insurance cost is half of what my brother and SIL would pay a year for long term care insurance (they are 5 and 3 years older than we are). Most likely we would either not qualify for long term care insurance or pay a lot for it due to pre-existing conditions.

I recalled that our life policy allowed for an accelerated death benefit if you were terminally ill. I called and this is the case in GA where we live now and CA where we plan to live after retirement. You have to have a Dr. state that you have 12 months or less to live. Otherwise you could use the insurance payout to replenish the money spent caring for the disabled or ill person.

For now we are going to use our life insurance as our long term care asset. This link Using Life Insurance to Pay for Long Term Care tells you about the various types of ways this might work for you.

5 comments:

  1. I don't have a long-term care policy, but have been thinking about it , so I found this very interesting & relevant. Thx!.

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    1. Glad it was helpful. A tough area for decision making.

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  2. My husband and I discussed this at length with our financial advisor. (Ours is fee only, so there is no conflict of interest as he does not sell any insurance.) One of the major problems with LTC insurance is that there are no guarantees that the rates won't go up! If the rates go up and become unaffordable, you lose all that you have invested in the policy. Also, there has been a number of companies lately that have gone out of business, again with no provision to protect what you have invested in their policies.

    Our portfolio has been designed such that if/when we need LTC we will have adequate resources to provide this. Your solution with your specialized life insurance policy would seem to work as well.

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    1. The marketplace for LTC insurance does continue to change rapidly. We plan to eventually rely on our assets but for now feel a need to continue our term life insurance as the rate is fairly low for what we would get.

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  3. Nowadays, people are given more long term care insurance options and one of becoming popular is hybrid insurance or combination products. This is recommended for people with children to protect and will need long-term care coverage in the future. I guess this will work perfectly for people who will only need long term care for a short period of time. This type of policy works like this, the amount of your long term care expenses will be deducted to your pool of money and the remaining amount will be given to your beneficiaries when you die. For me, hybrid policy is only suitable for those who don't need much coverage for extended care, skilled care and senior care communities.

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