The Best Life Insurance for Seniors with Long Term Care Protection

As we Baby Boomers age, we are thoughtful about what we will do if we get ill. Who will take care of us? Will we stay at home or go to a nursing care facility? And perhaps most importantly, how will we pay for this care we need? You have life insurance to protect your family in the event of your passing, but what do you have to protect your family if you have a long illness? Find out about the best life insurance for seniors with a long term care solution.

Will I Need Home Health Care or a Nursing Home?

Life expectancy has continued to increase during the last forty plus years. This makes it more likely that we will succumb to one or more disabling diseases requiring care. Health care costs will continue to rise during retirement. The cost of living increases cannot and will not keep up with rising costs.

 Some factors that will affect your health care costs in retirement are:

• Longevity
• Health care cost inflation
• Income during retirement
• Chronic illness care needed
• Gender, singles vs. couples, state of residence, and type of insurance plan

Long term care insurance is one option to cover the costs of nursing care later in life. But for many baby boomers and seniors, long term care policies are too expensive to consider. Although Medicare pays for some short term care, it does not cover care at a long term nursing home or at home. Some of us have enough saved in the event of a long illness, but most don't.

There are different levels of care, home health workers or nursing care. If you need round the clock care it comes at a steep price. Nursing care is very expensive. Home health care workers who are less skilled will cost less but are still quite expensive when paying out of pocket. Needing this level of care can quickly use up one’s savings. This could be a real concern for a couple where one gets sick. What happens to the surviving spouse? What will they have left to pay for living expenses? Will they have any nest egg left in case they need to tap it?

What to Do?

If Long Term Care coverage is affordable for you then talk to your independent life insurance agent. You have many options when purchasing this type of coverage and need help to understand the different choices. 

If Long Term Care coverage is not in your budget, there are riders available on some life insurance policies that can help. Additionally, there are senior life insurance policies with a built-in long term care rider that are more affordable than traditional long term care insurance. Discuss your options with your independent life insurance agent.

Asset-Based Life Insurance with Long Term Care Coverage

There are "asset-based life insurance policies" which were designed to solve the problem of long term care not being affordable for many seniors. These policies act as regular life insurance policies if you don't use the long term care benefits. However, if you need them, there is a built-in benefit for long term care coverage and continuation of benefits.  

How you structure the policy when you apply will determine your exact amount of coverage for both life insurance and long term care. You can buy one policy which will cover both you and your spouse. Traditional life insurance underwriting is required and because of the long term care component of the policy, the underwriter may have additional questions for you. These policies are much less expensive than stand-alone long term care coverage. 

Life Insurance with Living Benefit Riders

Some companies have term and/or permanent policies with these riders. These are senior life insurance policies that require traditional underwriting. There may be additional forms to purchase the riders, or they may be embedded in the policy. 

What If I Get a Terminal Illness?

If state law allows, most policies, both term and permanent policies will have an Accelerated Death Benefit rider included. This is a free rider. Here is how it works.

• You must have a terminal disease and have a life expectancy of 6 months to 1 year (depending on the life insurance carrier’s guidelines).
• Your doctor will have to attest to your life expectancy.
• You will be able to access a percentage of the face amount of your policy to pay for your care or to use anyway you choose. (Anywhere from 50% up to 100%).
• Note that there are fees associated with borrowing this money out of the policy. This loan and the subsequent interest will reduce the death benefit paid to your beneficiary. The money received may be taxable income (please consult your tax adviser).

Many baby boomers and seniors do not have the money to pay for any type of round the clock care, whether nursing care or a lower level of care. Although accessing the money for one's care will reduce the amount your beneficiary receives, it can save families from a financial nightmare, especially if your family is not equipped to handle the needed care. At the very least, it certainly gives you some financial flexibility. 

What If I Get a Chronic Illness?

Most insurance companies have at least one product with a Chronic Illness Rider or a policy with this rider built-in. There are certain criteria to meet, but you do not have to be terminal to access a percentage of the death benefit in your life insurance policy. Here’s how it works:

• You must apply for the rider at the time of your application. It cannot be added later.
• Your doctor will have to attest that your disease qualifies you for the rider benefits.
• You will be able to access a percentage of the face amount of your policy to pay for your care. (Anywhere from 50% up to 100%).
• As with the Accelerated Death Benefit, there is a fee to use the option and the funds received may be taxable income. This may be considered a loan and interest accrue. Please consult your tax adviser.

This is not a replacement for long term care coverage. That said, in times of need it can be a great option to keep your family financially stable and provide needed care. Only you know your finances and how a serious illness would impact your lives.

If you don't have coverage, this rider should be a consideration for you. If you do have coverage the question is should you replace a policy you currently own with a new one that includes this rider? You have to consider the difference in cost against what you will gain. These policies are a little more expensive than an equivalent policy without the rider. If you are replacing a policy, you are older now and that will increase the cost too.  

What if I get a Critical Illness?

If you get a critical illness, such as cancer, heart attack, stroke, renal failure, ALS, need an organ transplant and more your life and your life expectancy may be seriously impacted.

• You will need care for the initial period while you recuperate from the event. 
• You may need ongoing care as well.
• Your doctor will have to certify your diagnosis.
• There are fees associated with accessing part of the face amount of the policy. Speak to your tax adviser to see if (and/or how) this payout affects your tax liability.

The funds can be used for your care, or for bringing the family together, or for anything you choose. This is one advantage of the riders.

Should I Purchase a Policy with these Riders?

Should you purchase new coverage? That’s a personal decision only you and your loved ones can make. The cost is very reasonable for what you get, and gives you options should you become seriously ill.

It’s something we don’t like to think about, but as we age, the inevitable approaches and we don’t know what will be. This rider could be your financial savior. Need more information? Your independent life insurance agent will be happy to discuss the details with you and see if you can qualify.

The Bottom Line

As we Baby Boomers age, we have to consider how we will pay for our golden years. Then we have to consider how we will pay if we need a lot of care. Some of us are fortunate that we don’t have to worry. Others have Long Term Care Insurance to cover any costs. If you aren’t in either of the last two categories, one of the options discussed here may be an inexpensive way to take the worry out of your senior years.