Life Insurance and Long Term Care Insurance Meet

The Wall Street Journal hit it on the head over the weekend.  Long Term Care Insurance is becoming increasingly expensive and harder to get.  People are looking for more affordable ways to protect their money and assets if they ever need to be in an assisted living facility, skilled nursing, home healthcare, etc. 

As an alternative solution there are life insurance policies that come with  "living benefit" rider endorsements to the policy to help satisfy this need.  This is increasingly more affordable than long term care insurance.  The living benefits allow for an accumulation of cash to be taken out of the policy to pay bills including, but not limited to, health insurance premiums, life insurance premiums, mortgage, assisted living facilities and rehab facilities.  This method of financing is much more affordable than depleting personal and retirement funds.

Depending on the life insurance policy, there are multiple 'living benefits' the policies will pay out for in cash to the policy holders.  Being chronically ill, depending on the policy, is when someone only has twelve to twenty-four months to live.  It is not a pleasant thought but some people have to deal with this question every day.  This will trigger a pay out on the life insurance.  Another trigger can be long term care benefits or a critical illness.  Some will even pay out for some type of disability benefit.

The industry has the traditional term insurance that will run out after a certain term period but have a living benefits option.  This is a great fit for a lot of people.  Others would like to see a long term investment side of things.  Using a universal life can provide flexibility and make their money go further.  Today, the average interest rates at the bank are less than 1.5% even with a money market.  With some Universal Life products a policy holder can earn as high as 4% (some cases there are higher earnings with other life and annuity type products).  Ask a banker for 4% and see what they say.  Life insurance, at this point, can be a better investment than letting money sit in the bank.

One drawback to having a life insurance policy with living benefits is not having enough coverage.  It is expensive not to have a policy that pays out but can be nearly as expensive if there was not enough coverage.  Some living benefits will pay out 100% of the death benefit but some are at a fixed percentage of 2%-4% of the death benefit.  Like buying any insurance coverage, making sure there is enough coverage is important.  An evaluation with an expert can be a way to determine how much you need and make a goal to obtain that amount.

Butch Zemar
www.EliteBenefits.net