insurance

Long-term care insurance vs. life insurance

Jack HungelmannDear Insurance Adviser,
We are 65 and are considering long-term care insurance. Is there any advantage to buying life insurance instead of long-term care insurance? Which would be cheaper? Which would be more reliable? Statistically, my husband will probably die first. If his care has taken all or most of our savings and assets, then a life insurance policy on him could provide funds to care for me.
-- Diana

Dear Diana,
You raise an excellent question which doesn't have an automatic "this one is better" response.  Here are some of the pros and cons of each option. I recommend that you work with a professional insurance agent or financial planner to help you decide which is better for you. 

At your age, a $300,000 whole-life insurance policy is probably less expensive than $300,000 worth of long-term care insurance. Whole-life insurance premiums are guaranteed to stay level for life. On the other hand, long-term care insurance premiums continue to rise dramatically, especially if the policy has inflationary increases built into the coverage.

Life insurance will definitely pay off because -- face it -- we all die. Long-term care insurance probably will pay off for at least one of you, though it's not a 100 percent certainty that either of you will need long-term care.

Through the federal Medicaid program, the government will pay for long-term care once you spend down your assets to poverty levels. But government provides no benefits upon death, other than Social Security benefits that can continue for a survivor.

If the government pays for your long-term care costs, it can come after your remaining assets upon your death. Life insurance proceeds, payable to a designated beneficiary, are exempt from government attachment.

Life insurance provides no immediate benefits to help defray the costs of long-term care, unless you have a policy that allows you to tap your death benefits early. Long-term care insurance pays for your long-term care costs as they are incurred. If you choose benefits correctly, long-term care insurance pays for care anywhere: assisted living, at home or at a nursing home.

Life insurance provides no inflation benefit. That means $300,000 of coverage purchased today when you're 65 will pay $300,000, 25 years from now, if that's when you die. But $300,000 worth of long-term care insurance purchased today at age 65 with a 3 percent inflation rider will pay out up to $500,000 at age 85, if that's when you need long-term care.

I hope this is helpful to you.

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