If you are wondering about purchasing a long term care insurance (LTCI) policy, you do have an option. A growing number of states are allowing the sale of long-term care hybrid policies that will allow you to purchase long-term care coverage with a unique rider added on to your life insurance plan. Yes, cheap long term care insurance is available.
Like everyone else, real estate professionals may face many health challenges during their lifetime. You can purchase health insurance coverage to offset the costs of health care, and you can purchase life insurance to provide for your family in the event of your death. Unfortunately, one of the most expensive challenges you may face is the cost of being in a nursing facility on a long-term basis.
Since long-term care facilities are now charging between $50,000 and $70,000 per year, those who are not in the top 10% of earners are faced with the decision of how to properly prepare for the reality of end-of-life care. Certainly, there is the option to spend down so that you might qualify for Medicaid, but what about surviving family members? Remember, you do not have to be a senior to need long-term care. But even if you are, Medicare is not going to pay these substantial expenses for you.
Getting a Long-Term Care insurance policy will transfer this risk to an insurance company, but the question is, can you afford it and will you qualify? There is, however, an alternative to expensive Long Term Care insurance (LTC), and that is by using the LTC rider that is available with most term insurance policies, making cheap long-term care insurance a reality.
How Does it Work?
When it pertains to long-term care, you may be able to include an accelerated benefit rider to your life insurance that will permit you to tap into (accelerate) your death benefit if you require long-term care during the course of your life. For this type of a rider to take effect, many insurers will need a prognosis of death within a year, and your benefit will typically be a substantial percentage of the death benefit in your policy.
As you can imagine, your death benefit will be decreased by the amount of the benefit you collect. If your long-term care costs are significant, you may eventually exhaust your death benefit (if it turns out your policy allows it). This would eliminate the original purpose of your life insurance policy–to provide financially for your surviving family members in the event of your death.
How do I Get the Funds?
The functionality of long-term care riders is different from company to company. For instance, in some cases, you’ll be compensated for your long-term care expenses as they occur, up to the maximum set by the rider. In other instances, you may possibly receive a portion of the death benefit each month, which you can then use for your long-term care expenses. Before you purchase such a rider, make certain you comprehend exactly how you’ll be paid back.
In addition, you will want to understand what activates the prepayment of your death benefit that can be utilized for long-term care. For example, does only needing home health care entitle you to the benefits, or will you need to be chronically ill and incapable of performing at least three activities of day-to-day living to start getting benefits?
Should I Buy Stand-alone Long Term Care Insurance or Use the Rider?
Viewpoints differ on whether an accelerated benefit rider can be an appropriate substitute for a separate LTCI policy. The answer will depend on the amount of your life insurance policy, the money you’ll collect while the policy is in force to cover your long-term care costs, and how much long-term care is likely to cost at the time you’ll need it.
If you do the math, you’ll likely discover that an accelerated death benefit rider on your life insurance policy may not cover all of your long-term care expenses but it is a great way to get cheap long term care insurance. In reality, it may give you a mistaken sense of security that each of your needs will be met. And don’t forget that long-term care benefits you receive will lower the policy’s death benefit, potentially leaving little or nothing for your surviving family members.
Then again, the premiums on a stand-alone LTCI policy can be very expensive, based on your current age, your health, and the features offered. If these costs make such a policy cost prohibitive, a long-term care rider on your insurance policy may be a reasonable middle-ground solution. A rider can allow you to tap into your death benefit if you require long term care insurance during your lifetime.