Pretty much everyone would agree that a longer life expectancy is a good thing. But making it to an older age can throw a wrench in your financial planning.
That’s especially true if you require long-term care, or help with your daily activities as you get older. MarketWatch says that you could pay roughly $100,000 a year for nursing home care, more than $50,000 for a home health aide or a spot in an assisted living facility, and just shy of $20,000 for adult day health care. Long story short, long-term care isn’t cheap.
That fact becomes particularly worrisome when you realize just how likely it is that you’ll need long-term care. The Department of Health and Human Services (HHS) estimates that roughly 70% of people will need long-term care at some point in their lives.
That leaves you with a high chance of a high expense, most likely once you’ve already reached retirement. And while Medicare can help with the cost of your doctor’s visits and medication, it won’t cover expenses related to your daily life. In other words, if you need help getting around, getting dressed, or eating, you’ll be on the hook for the cost of that care.
Ultimately, the high cost of long-term care warrants some planning. And, fortunately, insurance products are available to help. They aren’t all created equal, though, so let’s take a look.
What insurance covers long-term care?
If you google long-term care insurance, you’ll primarily pull up results for a standalone long-term care insurance policy. These policies deliver what you’d expect: insurance to help with the cost of long-term care, whether that’s a live-in home health aide, some help during the day, or nursing home care. But these standalone policies aren’t particularly popular.
Why? For two big reasons. First, they’re use-it-or-lose-it policies. If you don’t end up needing long-term care, you will have paid premiums for nothing. So is long term care insurance a waste of money? Not in every case, certainly, but it could be.
And that brings us to the second big issue with standalone long-term care: the cost. The American Association for Long-Term Care Insurance gave data on 2019 policy costs (the most recent year for which data is available). Take a look below to see how much healthy individuals can expect to pay for a standalone policy:
To reiterate, these are healthy people below the age of 60. As you get older or health conditions crop up, you can expect to pay a fair chunk more for your coverage. In other words, the best age for long-term care insurance is relatively young —but most people aren’t thinking about their future needs for help with daily activities at that point.
What’s more, long-term care policies can come with variable premiums. That means your insurance provider can increase the amount you need to pay for your policy through the years.
For all the money you’d pay for a standalone long-term care policy, you might want to consider an alternative: life insurance with a long-term care rider.
Can I use life insurance to pay for long-term care?
Standalone long-term care insurance doesn’t have a death benefit. If you never end up needing care, your policy gives you diddly squat. But if you buy life insurance with long-term care, you have a way to pay for later-in-life care and your loved ones will still get a policy payout if you don’t end up needing it.
Does life insurance cover long-term care automatically? No. So how do you get a long-term care/life insurance hybrid? You add something that’s called a rider when you get your life insurance policy. This gives you life insurance with living benefits, meaning you can use part of your policy benefit while you’re alive.
The rider allows you to tap into your death benefit to cover the cost of your long-term care. Your long-term care/life insurance hybrid policy comes with some requirements, though. In order to get your long-term care covered, you usually need to be diagnosed with a chronic illness, like:
- Alzheimer’s disease and dementia
- Heart disease
- Parkinson’s disease
Furthermore, to qualify for long-term care coverage, your illness usually needs to interfere with your ability to perform daily activities. Insurance providers usually kick in coverage when you can’t do at least two of these six things, which they call activities of daily living (ADLs):
- Get dressed
- Maintain your personal hygiene (i.e., bathe or shower)
- Control your bladder and bowel movements
- Use the toilet normally (i.e., get there and clean yourself after)
- Get in/out of a bed or chair on your own
If you need help with at least a couple of those things, your life insurance with long-term care can come to the rescue to cover some or all of the cost of the help you need.
How does life insurance with a long-term health care rider work?
With a long-term care and life insurance hybrid policy, the cost of your long-term care gets pulled from your death benefit. Depending on your insurance provider, you might get money for your care as one lump sum or paid out as you need it. Then, you can use it for whatever level of care you require, whether that’s a private nurse, a spot in an assisted living or nursing home facility, or some other type of assisted medical care.
In most cases, there’s a waiting period of 90 days before your long-term care rider will kick in.
Most long-term care riders also come with caps on monthly payouts (e.g., 1-4% of your total death benefit) and a maximum lifetime benefit. The good news is that those caps can protect your legacy.
That’s because the money you’re getting is subtracted from the death benefit you’ll leave your loved ones when you pass away. If you were able to use your entire death benefit for your long-term care costs, you could leave your family without any money to cover your funeral expenses when the time comes. By setting a max amount of your death benefit that you can use for long-term care, your insurance company essentially protects your legacy, ensuring your loved ones get something when you die.
Can term life insurance be used for long-term care?
Not usually. In most cases, if you want a life insurance policy with a long-term care rider, you’ll need to get permanent life insurance. The riders you can attach to term policies, which expire after a certain number of years, are generally fairly limited. However, there are a few term policies on the market that do offer a long-term care rider.
Are long-term care riders on life insurance a good deal?
The cost of a standalone policy was probably enough to scare you off if you’ve ever wondered, “Is it worth it to buy long-term care insurance?” That, then, begs the question, “Should I buy life insurance with a long-term care rider?”
In order to answer that question, you’re probably wondering how much hybrid long-term care insurance costs. The issue is that just like the life insurance policy itself, the cost of a long-term care rider totally depends on you: your age, your overall health, and the policy benefit you need. To figure out how much you’d pay for this type of hybrid policy, the best option is to get quotes from a few companies.
As you decide if you should get life insurance with a long-term care rider, you also need to think about the effect using your rider will have on your death benefit. If you know your loved ones will need income replacement after you’re gone, using part of your death benefit for long-term care might not be the best option for you.
Ultimately, each individual’s needs are different. If you want help determining the best choice for your long-term needs and the legacy you want to leave behind, don’t hesitate to contact our team of life insurance experts here at Sproutt. We can help you determine the best type or types of insurance to plan for your and your loved ones’ futures.
Who are the top long-term care insurance providers?
As part of the life insurance vs. long-term care debate, it’s also worth looking at insurance companies. Understanding who offers long-term care insurance vs. life insurance and how favorably people review their service and their rates can help you find top options.
If you want a standalone policy, many people like Bankers Life long-term care insurance. They get an A+ from the Better Business Bureau (BBB) and the Bankers Life long-term care insurance ratings are decent on Consumer Affairs.
And, of course, we have to mention ourselves. We can help you find the best long-term care life insurance policy, or life insurance with whatever other riders best meet your specific needs.
We do things a little differently here at Sproutt. We look at you as a whole person, taking into account things that could help you get more affordable life insurance, like your exercise routine or how much sleep you get at night. In other words, we see you as a person — not a sales opportunity. To talk with a team of compassionate experts so we can help you plan for the future, contact our team at Sproutt.