Are you playing the right insurance odds ?
The odds of having a residential fire are less than 1%. You probably have fire insurance. The odds of having police reported car accident are about 2%. You probably have car insurance. The odds of being admitted to a critical care are a little more than 2%. You may have health insurance. The odds of needing long-term care are 70%. Do you have long-term care insurance?
We often hear people rationalize not having coverage for long-term care saying, “It’s too expensive” or “What if I pay premiums and don’t use the coverage?” or “I’ll self-insure.” There are two ways to get long-term care benefits that address the first two objections. These are a hybrid life / long-term-care product and life insurance with a critical illness rider.
The hybrid life / long-term care policy usually involves redirecting savings (i.e. savings you might set aside to self-insure) to purchase a single premium payment life insurance policy. For example with this type of policy, a healthy 60 year-old woman could be eligible for long-term care benefits equal to 5 times the total premium. In this scenario, she makes a single premium payment of $100,000 and has immediate access to $500,000 worth of long-term care benefits. It is also possible to set up a payment plan that stretches premium payments out over as much as ten years. The benefits in a hybrid plan are similar to what one would have in a conventional long-term care insurance plan, with the addition of providing life insurance of more than 150% of the premium. Another plus is that the entire premium is available should the owner decide to cancel the policy prior to taking benefits. This allows the owner to maintain control of their savings while insuring against long-term care costs.
Another approach is to add a long-term care rider to a “permanent” life insurance policy. The Hartford has a unique, patented rider that will pay 2% of the face value per month for over four years once someone has been certified by a medical professional to be eligible for long-term care. The unusual feature of this particular policy is that the benefits are paid on an “indemnity” basis to the insured. That is, the benefit is not a reimbursement for long-term care expenses. The beneficiary can use the money for any purpose whatsoever. If, for example, someone has a $300,000 life insurance policy, they could receive 50 monthly checks of $6,000. This type of plan is an excellent way to provide funds to pay a family member who is the primary caregiver to an elderly relative.
If you are interested in exploring some of these alternative ways of providing for long-term care without getting a long-term care insurance policy, contact Jim at (925) 254-6262 x2.
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