Combining Benefits for Life Insurance and Long-Term Care Needs

Although most individuals understand the need for insurance coverage, there are times when having numerous policies can seem overwhelming – as well as quite costly. For this reason, many have opted to obtain coverage for multiple insurance needs using one single policy.

One example of this is the combination of life insurance with long-term care coverage. With a combination of life insurance and long-term care plan, a policy holder can obtain two forms of protection in just one policy.

How to Combine Life and Long-Term Care Insurance Coverages

There are two different ways that these combination plans are set up. One option is a single premium insurance policy allowing the policy holder to deposit one lump sum, and then receive a specified amount of long-term care coverage if so needed, or to have their beneficiaries receive death benefit proceeds if the long-term care coverage is not used. The life insurance policy can typically be a universal life, whole life, or variable universal life plan.

The long-term care benefit is usually a percentage of the lump sum amount of dollars in the policy. For example, if there is $100,000 in the policy and the long-term care benefit is 2%, then the policy holder will receive $2,000 per month in long-term care coverage. And, in many cases, if the policy holder uses a portion of the long-term care benefits and then passes away, his or her beneficiaries will receive a reduced death benefit amount from the policy.

The second option for a combination life insurance and long-term care policy is what is known as the “optional rider” plan. With this option, the base policy purchased by the policy holder is a permanent life insurance plan (as versus a term life insurance policy). The long-term care insurance benefit is provided through an optional rider on the policy. Oftentimes, these types of policies have a recurring premium payment due.

How Combination Coverage Works

At the core of combined coverage plans is the life insurance policy, with a designated face amount that will provide the policy holder’s beneficiary with an income tax free death benefit. Then, the addition of a qualified long-term care rider will allow the life insurance contract to be accessed for living benefits by paying down the face amount of the death benefit when the policy holder qualifies for long-term care benefits.

Typically with these policies there is a maximum monthly benefit that is defined in the contract – and as the long-term care coverage is paid, the death benefit will be reduced by the amount of those payments. In addition, the monthly long-term care benefit amount will usually be structured so that the death benefit can be fully paid out over a two or three year time frame.

Some policy options can even provide multiples of long-term care coverage options. For instance, if the policy holder purchases $200,000 of life insurance coverage, they could essentially have access to $400,000 to pay for their qualifying long-term care expenses. Then, any portion of their death benefit that is not used for long-term care expenses will go to their beneficiaries as a death benefit.

Additional Policy Options

The combination life insurance and long-term care policy may also offer an optional extension benefit whereby the policy holder can continue receiving a monthly benefit for a specified period of time. In many cases, this can be for up to four years.

Both types of life insurance and long-term care combination products will tap into the life insurance policy’s death benefit proceeds in order to cover the insured’s qualifying long-term care expenses. This generally will occur after an elimination period of 90 or 100 days.

In many cases, the policy holder is given the option of how long they wish to receive their long-term care benefits. Typically they may choose among such options as 24, 36, 48, or 60 months. And, in some cases, a lifetime option is also available.

How to Qualify for Coverage

The way that policy holders qualify for benefits uses the same criteria as regular tax qualified long-term care insurance policies. For example, the insured must either be unable to perform two out of six basic activities of daily living (eating, dressing, bathing, continence, toileting, or transferring), or they must have a severe cognitive impairment.

When applying for coverage on these types of policies, an individual will need to go through the typical steps of life insurance underwriting, along with some additional standards that are used for underwriting traditional long-term care insurance plans. Therefore, it is essential that applicants be in relatively good health in order to qualify for coverage, though do not let this stop you from looking for the insurance coverage you deserve, there are options out there such as no exam life insurance that could be looked into if necessary.

If an applicant does have some pre-existing health related conditions, they will need to speak with a qualified insurance professional regarding the need to submit additional information to the insurance underwriters for review.


Susan Wright holds a BA from Michigan State University and an MBA from St. Louis University. Having over 20 years of working experience in the insurance and financial services industry, she has trained more than 10,000 financial services representatives. Susan has had licenses in real estate, insurance, and NASD Securities, and she has earned nine industry professional designations, including CLU, ChFC, RHU, REBC, CSA, CLTC, CCFC, CSS, and ADPA. Read more about her on Google+

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