Life Insurance with LTC riders V.S. Traditional Long Term Care

There are multiple life insurance companies who offer life insurance products with long term care insurance riders which can be added onto the policy for the purpose of accelerating the death benefit if the insured cannot perform two out of six of the activities of daily living or has a cognitive impairment. The concept is an alternative to purchasing a traditional long-term care insurance policy which only pays out a daily or monthly benefit if the policyholder files a claim for some type of custodial care assistance. In contrast life insurance policies with long term care insurance riders will either pay out a death benefit in the event of a chronic illness while the insured is still alive or when they pass away.

Cost of LTC vs Life Insurance with LTC riders

Traditional long-term care insurance will be lower cost initially because there is higher probability a claim will not be filed than filed. If someone purchases a traditional LTC policy and just passes away, no benefits are paid out (unless an LTC insurance company offers a return of premium feature which is very expensive and typically cost prohibitive). Furthermore, premiums on traditional long-term care insurance policies are guaranteed renewable just like health insurance plans, this means insurance companies reserve the right to raise premiums in the future. Generally, policyholders who purchased traditional long-term care insurance twenty years ago have seen significant premium increase or their initial benefits drastically decreased. It is important to consider the total amount of premiums that will be paid for the policy until life expectancy of the insured and take into account realistic future premium increase.

Conversely, life insurance with LTC riders will be more expensive initially, but properly selected life insurance policies are designed to pay out the death benefit while the insured is still alive if they have a cognitive impairment or cannot perform two out of the six activities of daily living which are:

  • Bathing
  • Continence
  • Dressing
  • Eating
  • Toileting
  • Transferring

Furthermore, premiums on guaranteed premium life insurance policies are what’s called “non-cancelable” which means the insurance company can NEVER increase the premium. Take the time to analyze the options. Life insurance death benefits will be paid out in the event of a chronic illness or when the insured passes away and the premiums are totally guaranteed. Over the last five years there has been a major shift with more people purchasing life insurance policies with LTC riders than traditional long-term care insurance.

Future of The Baby Boomers

The reality of the current situation in the United States when it comes to funding long-term care benefits is not very positive. There will be millions of baby boomers who will need some type of custodial care service provided to them before they pass away and someone will have to pay the bill. Currently Medicare services do not cover custodial care for extended periods of time and people basically have to spend down almost all their assets before they can qualify for Medicaid. Only a small percentage of baby boomers can or want to afford paying for traditional long-term care or life insurance policies with LTC riders, so it is hard to predict the future landscape of baby boomers when it comes nursing home protection.

If you or someone you know is looking for more information about traditional long-term care insurance or life insurance with LTC riders, someone on the Pacific Insurance Group team would be happy to help. We do in person meetings at our office as well as internet based meetings through the computer and there is no charge to speak with us. Our phone number is 425-246-1676 or you can schedule a meeting on our website.