Life insurance is one of the most important things we should invest in but a lot of people are unaware of the benefits and how it can positively impact our lives.
In this article, we’ll focus on the most ideal types of insurance for seniors. This will help you understand better why acquiring life insurance for seniors with long term care rider is important and how elderly people can benefit from it.
There are many types of insurances available to choose from which can be somewhat confusing. In addition, getting a life insurance policy for senior citizens and elderly people can get a bit intimidating.
As we get older, the risks also become higher. Therefore, acquiring life insurance with a long-term rider is an ideal solution, especially for seniors who do not want to constantly worry about their future.
Why Do Seniors Need Life Insurance?
There are many reasons why people get a life insurance policy. It can also depend on the type of insurance policy you are eyeing. An insurance policy will help provide coverage for your needs.
It can help pay for your debt, funeral expenses, mortgage, and any outstanding bills that you may leave behind when you pass away. This prevents your family from taking over your unpaid bills. It can also provide income to your loved ones who are depending on you for their daily living expenses.
Hence, you will be able to provide their needs financially even when you are not around anymore. You can also purchase insurance to receive death benefits for your loved ones or a certain charity of your choice.
However, you also need to decide how much death benefit you want before purchasing life insurance. Usually, seniors do not require a high amount of death benefit. Another thing you need to consider is if you need to get short-term or long-term coverage.
Adding Riders for Long-Term Care
Purchasing Long-Term Care (LTC) rider to your current insurance policy allows you to access a part of your death benefit even while you’re still alive.
However, the amount you borrow will be deducted from your policy’s total benefit which means that your beneficiaries will receive a lower amount. The advantage of having a rider is that you can use it as financial support in case you become critically ill.
As an additional option to your policy, it uses the money from your death benefit to pay for long-term care. In some policies, an LTC rider is combined with an accelerated death benefit (ADB) and is offered as one item.
However, the qualifications for each differ. LTC is mostly triggered by chronic illness while ADB requires a diagnosis of a terminal illness before being triggered.
What is Long-Term Care Rider?
The long term care rider is designed as an add-on to your life insurance policy. It is designed to cover long-term needs that aren’t included in your policy. A rider offers financial support to the person insured in case they are unable to provide for themselves for their daily needs. In most cases, this benefit is received as a lump sum payment for a specific period.
If you are caring for an elderly parent, at some point you’ve probably wondered how you are going to pay for their nursing home. Many people are plagued by this thought.
In some cases, a spouse may develop a health condition that may require long-term care in a health facility or home treatments. With unforeseen situations, people may end up using their retirement savings to support their current needs.
How Does It Work?
Long-term care rider covers services if you are unable to take care of yourself due to disability caused by a physical, medical or cognitive illness. This pertains to your everyday basic activities such as getting in and out of bed, going to the bathroom, getting dressed, and eating among many others.
Long-term care rider covers different types of care such as home care, nursing home, and adult day care among other long-term care facilities and services.
Why Purchase Long-Term Care Rider?
Based on statistics, 70% of elders who are past 65 years old will require long-term care at some point in their lives. Since it can be very expensive, it can easily put a dent in your savings.
One thing you need to keep in mind is that purchasing long-term care rider entails a higher premium. On the other hand, it costs less compared to buying a separate long-term care policy and it provides the same benefits.
Another way to pay long-term care is to include an ADB. This option allows you to advance your insurance benefits without paying taxes while also receive the payout from the policy. Adding an ADB feature may allow you to pay monthly premiums.
It is a practical way to utilize your insurance policy to be able to pay for long-term care. If you are one of those people who constantly worry about long-term care, purchasing an additional rider can give you peace of mind.
Advantages of a Long-Term Care Rider
You Can Prepare for the Future
Adding long-term rider allows you to plan ahead. This means that you can plan your payment instead of expecting a bulk payment when the time comes. At the end of the day, your objective is to be able to financially support your loved ones.
The best way is to address this issue as the earliest possible. It is also less expensive to self-insure yourself or add a rider to protect you from this risk. This is a more practical way of approaching this situation.
People who already have permanent insurance prefer adding a long-term care rider to be able to pay for nursing home care. The premiums and coverage of this policy can be customized to fit your needs and requirements.
You Can See Where Your Money Will Go
A lot of people want to see the fruits of their investments. One way to address this issue is to purchase an insurance policy that can also accumulate cash value and at the same, you can borrow the cash to support your retirement fund.
A whole life insurance plan can help you achieve those goals. Plus, it can also be tailored to fit your preference. One advantage is that you can add riders for supplemental coverage.
Riders are designed to make your financial planning a little bit easier because it simply allows you to plan ahead and prevent unpredictable long-term costs from depleting your savings. The rider will pay for the costs of the nursing home for a specific period or even until the insured passes away.
In addition, the cash value that comes with the rider allows your beneficiaries to receive it if the funds are not used for nursing care. The benefits may come from the guaranteed death benefit or the unused cash of the rider’s value. The beneficiaries receive the payout without any estate taxes or probate fees.
There is a Specified Coverage
One advantage of long-term care rider is that the coverage is pretty much defined. There are clear conditions on how you can avail the benefits.
Once you are declared to be incapable of performing at least two or three of your daily activities, you will start to receive the benefits from your long-term policy.
Another way to receive your benefits is if you are diagnosed with a certain health condition. You may be able to access the cash value if you are diagnosed with a life-threatening condition, terminal disease or if you are required to undergo a long recovery from an injury.
Combining Life Insurance for Seniors with Long-Term Care Rider
When you are purchasing long-term care policy, the biggest risk is that you might spend on something that you may or may not use. This policy is specifically designed to pay for nursing homes or home health service.
If you are not sure if you are going to need this, there are other types of policies that combine permanent life insurance with long-term insurance.
How it Works
A combined life insurance and long-term care insurance policy can cover long-term care, unlike the standard health insurance. At the same time, if you don’t use up the long-term care benefits, your beneficiaries will receive the payout after you die.
A combined product is also referred to as an asset-based policy. Usually, you need to pay for a one-time lump-sum or a couple of annual premiums for policies that are less than 10 years. However, it will all depend on the policy you are getting.
This set-up also offers money for long-term care which is several times the premium payments. However, you will have a lower amount of death benefit depending on how much long-term care benefit you will consume.
Meanwhile, some policies provide a small percentage particularly around 10% of the death benefit even if you consumed the funds for long-term care.
Some combination policies may require you to undergo a medical exam to qualify for the policy. Other policies, on the other hand, will only require you to provide answers to certain questions about your health.
Typically, if you purchase a policy that requires your medical records and a medical exam, you’ll pay a lower premium for your coverage.
Why Most People Prefer It
There are different types of combination policies which also mean that they offer different features. One of the biggest attractions of buying a combined policy is that you are guaranteed to receive something for the premiums you’ve paid. When you choose to pay in a lump sum, you won’t have to deal with higher rates.
Since a combined policy offers limited payments, the premiums may possibly remain the same, unlike some long-term policy rates that tend to go up. Another advantage of purchasing a combined policy is that some policies offer a money-back guarantee.
With this feature, the insurance company will give you back your premium if you cancel your premium after a specific period, usually five years. If you cancel it before the specified period, you only get a percentage of your paid premiums. Ultimately, it is a valuable investment compared if you just kept your money in the bank.
The Disadvantages of Combined Policies
While a life insurance/long-term care policy has its advantages, it may not be for everyone.
- You only need one policy. If you think you can live on one insurance policy, then this may not be ideal for you. What you should do is consider purchasing permanent life insurance. A permanent life insurance offer coverage for the entire duration of your life.
- It comes with life insurance. If you prefer to get a temporary plan instead of lifetime coverage, you should opt for term insurance which will also cost you less.
- Combination policies cost more. If you aren’t ready to pay for a huge premium and if you don’t have the budget for a combined policy, you should opt for a single policy.
Everyone’s situation is different and the type of insurance you get should be based on your specific needs.
Most often, a combined policy such as life insurance with long-term care rider offers sufficient benefits that will provide you with up to an average of three years of long-term care. In some cases, it may not be enough and you might need a longer duration of long-term care.
Meanwhile, if you won’t require it, then your beneficiary will benefit from it. At the end of the day, we cannot tell what the future will bring us. Even though most people don’t plan for long-term care, you may realize that as we get older, the higher the chance our health will deteriorate and that we may need that extra health care.
Before you decide if life insurance policy with long-term care rider is for you, you should do your research first. Get quotes from different insurance companies and check out their ratings. Combination policies may vary and at the same time, they also offer different benefits.
Make sure you consult with a financial adviser and compare your options between single long-term care insurance, life insurance, and combined life insurance with long-term care rider.