insurance

Long-term-care insurance does double duty

Highlights
  • The new approach to long-term care insurance offers greater options.
  • Put your long-term care policy together with life insurance.
  • Have your long-term care insurance policy double as an annuity.

More and more, financial advisers are recommending that clients have long-term-care insurance as part of their overall financial plan.

"Long-term care helps to mitigate the financial, physical and emotional consequences of caring for someone who has physical and/or cognitive impairments," says Barbara Carrollo-Loeffler, a financial representative with the Northwestern Mutual Financial Network in Summit, N.J.

Specifically, a tax-qualified, long-term-care insurance policy will pay benefits if and when you have a cognitive impairment, such as Alzheimer's disease, or you need assistance with two of the six so-called activities of daily living: eating, bathing, dressing, going to the bathroom, getting in and out of bed or a chair, and maintaining continence.

Extra peace of mind about the future is always good, but there's a cost. If you buy long-term-care insurance and never use it, it's the best scenario for your health. But have you wasted the money you spent on premiums?

That's the question that's spurred insurance companies to design hybrid products, allowing customers to get some benefit from their long-term-care insurance even if they never need care.

Long-term care with life insurance

The John Hancock Life Insurance Co.'s LifeCare based in Boston is a combined whole life insurance policy with long-term-care insurance, according to Chris Rogers, John Hancock's vice president. It is a single-premium life insurance policy with a cash value. In other words, you can use this like a simple life insurance policy. You pay in an amount of your choosing in one lump sum (a single premium). Whenever you die, the company pays your heirs some multiple of that amount. "The death benefit is approximately 2.5 times what you put into it," Rogers says.

But there's a distinct difference with LifeCare than with other policies.

"The death benefit can be accelerated and used for LTC. If you need care during your lifetime, you can draw down on the benefit to pay for those needs. Whatever you use reduces the balance in your life insurance plan, but if there is something leftover when you pass, that amount is still paid to your named beneficiary," Roger says.

The "cash value" is also a benefit of this plan that doesn't come with a standalone, long-term-care insurance policy. If you cancel your LifeCare policy at any point, you get back the amount you put into it.

OneAmerica's State Life Insurance Co., based in Indianapolis, has the Asset-Care plan with similar benefits. Bruce Moon, vice president of OneAmerica's State Life says, "We take whole life insurance and utilize the death benefit if it's needed for LTC. It can work as a regular life insurance policy for anyone who doesn't need LTC."

An Asset-Care policy can be purchased with a single premium or a monthly premium, in any amount from $50,000 to $1.5 million.

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Dan Jones, an internal wholesaler for Nationwide Mutual Insurance Co., based in Columbus, Ohio, says Nationwide doesn't sell any standalone, long-term-care insurance. But it does offer a long-term-care rider, or an addition or alteration, to their universal-life and variable-life insurance policies.

"If all goes well, you pass the money on to your heirs. But if not, we advance the death benefit to you to cover long-term-care costs during your lifetime," Jones says. He notes another advantage: "The benefits are income tax-free because life insurance payouts aren't taxed, and all we're doing is essentially advancing a death benefit."

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