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 policyholder can obtain two forms of protection in just one policy.

When you’re shopping for insurance coverage, it’s vital that you have the coverage that your loved ones will need, and to do that, you’ll need to understand all of the different options that are available to you. We know that getting the best life insurance plan can be a complicated and frustrated process, but it doesn’t have to be. We are here to help make the process as quick as simple as possible.

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 policyholder 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 policyholder will receive $2,000 per month in long-term care coverage. And, in many cases, if the policyholder 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 policyholder 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 policyholder’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 policyholder 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 policyholder 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 policyholder 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 policyholder 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 policyholders 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.

No Exam Life Insurance

When you’re shopping for life insurance, there is a chance that you could be declined for the policy because of your health or any pre-existing conditions. One excellent alternative is to buy a no medical exam policy, which allows you to get insurance coverage without being required to take the medical exam. There are several benefits and drawbacks to these policies that you should be aware of when you’re getting life insurance.

The first advantage is that anyone can buy these plans, regardless of health or any complications that you’ve been diagnosed with. Because you aren’t required to take the medical exam, you’ll have a greater chance of being approved. The company will still pull medical records, but there are rare occasions when they will reject an applicant for coverage. It’s important that everyone has the insurance coverage that their family will need, and their health shouldn’t prevent them from getting that.
Another advantage to these policies is that you can be accepted for life insurance much faster than you can with a traditional plan that requires a medical exam. With a normal plan, you could wait up to a month to get coverage, but with a no medical exam, you can be approved in a matter of days. If you’re wanting to get life insurance protection as quickly as possible, a no exam policy is the best option.

There are several drawbacks to these plans, and the most notable one is that they are going to be more expensive than a policy that requires a medical exam. The purpose of the exam is to give the insurance company an idea of your overall health, which will help them determine how much of a risk you are for life insurance. Without that medical exam, they are going to offset the unknown risk by charging you higher premiums.

Another pitfall of no exam plans is that you’re going to be limited on the size of plan that you can buy. Most insurance companies only sell life insurance up to $250,000 with a no exam plan, which isn’t enough protection for most families. If you need more than that, you’ll need to go with a traditional route.

These no exam policies are a great option for anyone that’s been declined in the past, but if you’re looking to combine benefits with life insurance and a long-term care rider, then a plan that requires a medical exam is going to be a much more affordable option.

Because you never know what’s going to happen tomorrow, you shouldn’t wait any longer to get the insurance coverage that your family will need if something tragic were to happen to you. Life insurance is the best way to give them the money that they need, regardless of what happens to you.

If you have any questions about life insurance or long-term care riders, please contact one of our agents today. We would be happy to answer those questions and connect you with the best plan to meet your needs. It’s our mission to give you quality insurance at an affordable price.
We are independent insurance agents, which means that we work with dozens and dozens of highly rated companies across the nation. We can bring all of the best insurance plans and riders directly to you. No hassle or calling companies yourself.

About InsuranceScored.com
About InsuranceScored.com

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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