Life Insurance with Long Term Care: Why This Winning Combo May Be Right for You

Do you know how you would take care of yourself in the event of a medical emergency later in life? Who would pay for your care? What kind of home would you live in?

While thinking about death may seem morbid, it's essential that you consider and plan for your end-of-life costs.

Fortunately, life insurance with long term care is a winning combination that can provide invaluable peace of mind for both you and your loved ones. Let's get into what you need to know.

Quick Facts About Long Term Care

The average Canadian's life expectancy is 82.8 years. While it's normal to want to live a long and prosperous life, unexpected curveballs can thwart our plans.

There's a good chance that you'll need long-term care. Some figures estimate that nearly half of individuals who turn 65 will need a nursing home at some point.

Unfortunately, most people are woefully unprepared for this financial setback. Because even though we're living longer, we're also spending more money later in life. And while many of us hope to rely on friends or family to take care of us, this isn't always a viable option.

Long-term care facilities can devastate even the best financial planning. Some locations can cost over $100,000 each year! Multiply that by several years, and most people will be facing some serious problems.

Unfortunately, good health now isn't the best predictor of future success. A stroke, heart attack, or sudden cancer diagnosis can impact the ability of you to take care of yourself. And if that happens, you may require emergency medical assistance.

Why Your Retirement Savings May Not Be Enough

Maybe you have a robust emergency fund. Perhaps you've set aside money for your dependents, and you've even taken out a life insurance policy for you and your spouse.

That said, it may not be enough. As the population continues to age, the people who need long term care will continue to increase. Nursing home costs can quickly escalate to over six figures per year.

The location also plays a significant role. While rural areas tend to be cheaper, if you want to live in a major city, it's going to cost more for care. And if you want to live in a nicer facility, you should definitely anticipate paying the price.

Finally, if you are married, what will happen if both you and your loved one need care around the same time? How exactly do you intend to pay for it?

Stand Alone Long Term Care Coverage

These policies help pay for home health care or assisted living costs. At one point, they were relatively affordable. However, prices have since soared in recent years (after all, people are living longer).

As a general rule of thumb, stand-alone policies tend to be expensive, and they don't have an inherent cash value.

Furthermore, over time, the premiums tend to increase. If you can no longer afford the policy and must cancel, you lose out on the money you paid into it.

Today, buying a single plan isn't usually the best course of action. Instead, it's smarter to look into annuities or adding a rider to your life insurance.

Fixed Or Deferred Annuities

Annuities offer steady income streams for life. They tend to cost less than stand-alone policies. They may also offer incentivizing tax benefits.

While it's true that annuities require steep upfront costs, the annuity can end up costing you less than what you would spend on insurance premiums.

Financial experts typically recommend only considering annuities after maxing out other tax-advantaged accounts. That's because they have some drawbacks including higher commission fees, management costs, and the willingness to hold your money for the long run.

Finally, the government taxes earnings as regular income. This applies no matter how long you have owned your account.

What Does Life Insurance With Long Term Care Cover?

Many life insurance plans offer you the choice to add on long-term care (LTC) rider. This choice offers financial benefits to the individual in the event that they can no longer provide daily care for themselves.

Typically, these policies cover for long-term care that health insurance or government funding does not cover. If you don't use these benefits, the insurer pays them out to your designated beneficiary upon your death.

Pricing for these policies vary. You may either pay a lump sum premium or several annual premiums over the course of a few years.

To qualify for most plans, you'll need to provide medical records and take a comprehensive medical exam. However, some policies will offer a simpler process that only requires answering some basic questions. However, these typically offer less coverage than those that require medical exams.

Understanding The Benefits

Even though these combinations may be expensive, they can still be a solid investment choice. Like with most insurance policies, the younger (and healthier) you are when applying, the lower your premiums will be.

Long-term care riders provide an excellent way for people with life insurance to fund their long-term stays. That's because the plans disperse tax-advantaged money to pay for these associated costs.

Most policies start paying out once the individual is unable to complete the basic activities of daily living. These activities include walking, dressing, or eating. However, policies may also start paying out if certain conditions or disorders occur.

Final Thoughts

Life insurance with long term care simplifies the planning process for unexpected emergencies or costly medical needs later in life. This provides tremendous sanity for both you and your loved ones.

Interested in learning more about the importance of life insurance? Check out this useful article today.