Three ways life insurance can help with LTC needs

In the spirit of National Long-Term Care Awareness Month, let’s answer some of the questions about using life insurance with LTC riders instead of traditional long-term care insurance as a potential solution for extended care planning.

When addressing clients’ concerns about overpaying for LTC, the typical and often the most efficient approach is a solution involving a traditional or asset-based LTCi policy. However, there are ways that life insurance can be beneficial for addressing LTC concerns.

First, many permanent policies offer the ability to take loans from the policy’s cash value. Uninsurable clients with an older whole life or universal life policy may find solace in having access to cash value to help cover the cost of care, should they need to. And clients who have policies designed to accumulate cash to help supplement their retirement may access the cash value in those policies to help pay for care.

Second, many permanent life insurance policies offer the ability to add a long-term care or chronic illness rider during policy issue. These riders allow the policy owner to access the death benefit in increments, typically at a rate of 2% or 4% per month, to help cover LTC costs. For example, a client who owns a $500,000 universal life policy with a 2% LTC rider would have access to up to $10,000 per month should they need care. Of course, this living benefit will lower the life insurance death benefit each month.

However, if care is never needed, the client has peace of mind knowing that the policy’s beneficiary will receive the $500,000. If care is needed for 10 months before the policy owner’s death, the remaining amount would still pass on to a beneficiary. In our example above, that client would have used $100,000 to pay for care, resulting in a $400,000 death benefit for the beneficiary.

Finally, it may make sense for the insurable spouse to buy a permanent life insurance policy for couples where one of the two spouses is uninsurable for LTC. In the event the insurable spouse pre-deceases the uninsurable spouse, there would be a death benefit available to pay for the survivor’s future care needs. And, to help cover the insurable spouse, it may be suitable to add a long-term rider to their policy.

For more information on how life insurance can benefit both legacy and living benefits, financial professionals should consult with their insurance broker to learn the best options that work for their clients.

Reggie Phillips, CLU, ChFC, CASL, is manager-insurance strategists at Truist Life Insurance Services. He may be contacted at reggie.phillips@innfeedback.com.

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