Life Insurance vs Long-Term Care Insurance
Most types of insurance are a crapshoot. You definitely pay in, but whether or not any of that money comes back to you depends on circumstances. The one type of insurance you know will definitely pay out if you keep paying in is one you’ll most likely never see a dime of personally – life insurance. Nonetheless, it’s a popular choice for individuals who want to make sure their family members will be well covered if something happens to them.
Long-term care insurance, on the other hand, isn’t guaranteed to pay off, but the chances are good. For those that reach the age of 65, 70% of them will end up needing long-term care down the line. Those are pretty good odds that you’ll be taking advantage of long-term care insurance if you have it.
But what if you know you can’t afford both? In that case, which one is best to go with?
The Benefits of Life Insurance
You know your family will be receiving the amount of your policy no matter what – there’s no use-it-or-lose-it aspect of life insurance because everyone will die at some point. The only reason the full amount might not go to your family is if your policy provides an option for you to take cash out of the policy while you’re still alive or allows you to sell it and keep the money.
Those latter options could end up playing a role similar to what you would get from long-term care (LTC) insurance anyway. Instead of getting money from a LTC policy to help pay for the costs of long-term care, you can take cash out of your life insurance policy to put toward the same purpose to protect your other assets or avoid having to lean on your family for those costs.
If a married couple purchases life insurance for the person most likely to pass first (in a heterosexual couple, this is usually the male), they can choose to spend their shared assets on care for the first one that becomes ill and then be confident that the other will still be taken care of once their partner passes.
One final benefit of going with life insurance is that you can count on your premiums to stay consistent. Once you start paying, you’ll keep paying the same thing until you die. Long-term care insurance doesn’t offer the same protection; premiums can go up and some people find themselves suddenly asked to cover significantly higher monthly costs in order not to lose everything they’ve paid in so far.
The Benefits of Long-Term Care Insurance
Long-term care insurance doesn’t have the premium protection that life insurance does, but plans do often offer inflation protection. As health care costs rise, those covered can count on their coverage to go up as well. Life insurance in comparison will pay out the same amount no matter what happens with inflation or the economy in between the time you start paying and when you die.
Most people get life insurance to help ensure their family’s financial well being, but long-term care insurance can potentially play the same role and do it better in cases where someone spends many years in long-term care. If you experience Alzheimer’s or any other malady that requires years of care, you and your family risk depleting your savings and theirs before a life insurance policy would ever pay out. With long-term care insurance, much of that cost is offset by your coverage.
Another Option: A Hybrid Plan
Both options have their benefits, which is why a new insurance product has been growing in popularity in recent years: a life insurance policy with a long-term care rider. Instead of sticking with one or the other, you can purchase a life insurance policy that will function as a long-term care policy if you end up needing to use it as such.
For as long as the life insurance amount lasts, you’ll have the money there to use. If you die before you go through it all, your family gets what’s left. If you don’t, you’ll still have to make use of your savings or help from your family to cover the remaining costs, but you’ll likely be left with far less to pay for out of pocket by that point.
Often these policies are expensive, so they’re not a great choice for everyone. But you can weigh your options against their costs and the likelihood that you and your loved ones will be needing long-term care in order to determine which choice is ultimately right for you.
Kristen Hicks
Kristen Hicks is an Austin-based copywriter and lifelong student with an ongoing curiousity to learn and explore new things. She turns that interest to researching and exploring subjects helpful to seniors and their families for SeniorAdvisor.com.