Dear Clients and Friends:
In my last two LISTEN TO LAWRENCE LETTERS, I have discussed long-term care insurance and some of the newer options. Today’s client question follows up on this theme.
Hi! I am curious as to your thoughts about the newer policies I am hearing about that have a life insurance option as well as long-term care. In essence, I think if you don’t use it then it is paid out as a life insurance policy.
It is true. You can now buy a permanent/whole (not term) life insurance policy that has a long-term care rider. This means that you can access the death benefit of the life insurance before you die if you meet certain criteria such as not being able to perform certain activities of daily living. These criteria are essentially the same criteria that you would find in a traditional long-term care policy. The cost of this rider is not expensive, almost nominal. The companies have figured out that you are probably going to be dying soon anyway, so they will give you some of the money early for your care.
“SOME” of your money is the operative word. Will SOME be enough? How much insurance do you have to buy to make this work, to get enough coverage?
The good news is that if you never need the insurance for long-term care, your family will get the death benefit from the life insurance, probably recouping the premiums and then some.
The bad news here is that permanent/whole life insurance is very expensive, usually way more expensive than traditional long-term care insurance.
Clearly, whether this is a good plan for you will depend upon your insurability and ability to pay the hefty premiums. Most of my older clients cannot afford traditional long-term care insurance or life insurance with a long-term care rider. Nevertheless, insurance remains another tool in the toolshed to protect your assets from the cost of long-term care.
Again, if insurance is not obtainable for you, Medicaid planning is the next option.