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Best Long Term Care Life Insurance [Top 10 Companies]
Life insurance with long term care insurance provides the benefits of life insurance coverage combined with long term care insurance coverage. If you die your policy pays a lump sum death benefit to your beneficiary but if you are unable to perform 2 of 6 activities of daily living your LTC insurance provides a cash benefit to you for long term care needs in a nursing home, assisted living facility, or in home care.
Life Insurance with Long Term Care Insurance
As we age, we become more susceptible to disability. As a result, older Americans are having to face the high costs associated with assisted living facilities. Currently, the median monthly rate for an assisted living facility is $4,051. Residing in a nursing home is more than double that—$8,517.1 Finally, according to LongTermCare.gov, someone turning 65 today has a 70% chance of needing long term care down the road.2
In the following post we will discuss the pros and cons of life insurance with long term care insurance hybrid policies.
What is long term care insurance?
Long term care insurance is a policy that provides a monthly income benefit to help cover the expenses of growing old with a disability or organic cognitive disorder. Long term care insurance is designed to pay for the rising costs of long term care. It can be added to a permanent life insurance policy, including cash value life insurance, Indexed Universal Life Insurance or single premium life insurance with long term care rider.
Benefits are paid out income tax free after meeting the requirements. Generally, the requirements are that you are unable to perform 2 of the 6 Activities of Daily Living (ADLs). The 6 ADLs are continence, bathing, eating, dressing, toileting, and transferring (getting around). Cognitive disability is an additional qualifying event that triggers a long term care rider.
The pay out for hybrid life insurance long term care rider comes out of the policy’s death benefit. If you never use the LTC rider, your life insurance beneficiaries will receive your full death benefit. However, if you use the rider, your beneficiaries will typically receive most of the unused death benefit.
Generally, you can receive care in a setting of your choice such as home care, assisted living facilities, or nursing homes.
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Options for Life Insurance with Long Term Care
To buy a long term care and life insurance combo, you'll need to start with a permanent life insurance policy, since most insurers don't offer the option with term life. Then, you'll need to add a long term care rider to the type of life insurance policy you choose, usually whole life or universal life.
Whole life insurance with a long term care rider
Designed to cover you your entire life, whole life insurance never expires, and neither will your long term care benefits when paired with this rider.
Universal life insurance with a long term care rider
Because universal life insurance offers flexible premiums, coverage lengths, and death benefits, adding a long term care rider is a little more complex. You'll need to keep paying enough in premiums to fund your policy, or you could lose both your life insurance and long term care benefits.
Long Term Care Insurance Quotes
Your long term care insurance rates will vary based on your age, sex, health, lifestyle, how much benefit income you want to receive, how long of a benefit period you need, and how long your elimination period will last. By combining your long term care with life insurance, you can fix your premium, which provides financial stability in retirement.
You can adjust your benefits to get lower long term care insurance quotes to fit your budget. The better the benefits, the more premium is required. As a general rule of thumb, your annual long term care insurance premium will typically represent 1% of your total net worth. So if you have a net worth of $500,000, a good long term care insurance plan will cost you about $5,000 a year, or roughly 1% of your total net worth.
Top 10 Best Long Term Care Insurance Companies
Our current crop of favorite hybrid LTC/Life insurance companies and stand alone companies are listed below. Each long term care insurance company below offers either a linked benefit combination policy, life insurance with long term care rider, or a stand alone LTC insurance policy. Each company's policy offers unique benefits and it is difficult to know which combination long term care life insurance company or stand alone will be the best choice for you.
Our Top 7 Best Hybrid Long Term Care Insurance Companies
(in no particular order)
Our Top 3 Stand Alone Long Term Care Insurance Companies
Who should consider long term care insurance?
Everyone should at least consider a long term care insurance policy. Those who have a family history of cognitive diseases, such as Alzheimer’s or dementia, and those with a family history of serious diseases, such as diabetes, cancer, stroke, and heart disease are particularly at risk of a long term disability. As of 2017, the number of people in the U.S. requiring long term care is probably above 15 million. And the longer you live, the more likely you will need long term care.
Another category of people who should consider long term care insurance include would-be business owners. Adding this rider onto key man life insurance may be a smart choice, especially when using life insurance to fund a buy-sell agreement.
Long term care insurance is ideal after age 65 but it makes sense to purchase your policy while you are younger in order to get the best long term care insurance quotes. In contrast, long term disability insurance is ideal before retirement, as most policies have an end date by age 65 or to age 67.
How do I access long-term care insurance benefits?
A long-term care insurance policy has some qualifying requirements. The primary requirement is that you are unable to perform 2 of 6 activities of daily living. Once you meet the qualifying definition of disability, whether physically or cognitively, then you or a caretaker will file a claim with the insurer to receive your benefits. Once the insurer is notified of your claim, your elimination period begins. Some companies go by calendar days and others use service days. When the elimination period has passed you will be eligible for income benefits via cash indemnity or reimbursement benefits.
Types of Long Term Care Insurance Benefits
Cash Indemnity Benefit
Our favorite long term care benefit plan is cash indemnity. Under this plan, the owner of the policy is paid directly each month and he or she can use the funds for various needs at the policy owner's discretion. The indemnity method provides the most flexibility. The drawback is that you cannot access as much money as under the reimbursement benefit
Under a reimbursement benefit long term care insurance plan, bills are submitted to the carrier by the policy owner and the owner is reimbursed according to actual expenses. There is less flexibility under a reimbursement plan because some expenses may not be covered.
Hybrid Income Benefit
Some companies offer a hybrid policy where money is reimbursed but the owner of the policy can receive a portion of the monthly benefit paid in cash.
What are the pros and cons of long-term care insurance?
The number one long term care insurance pro is it allows you to be prepared. A lot of people are caught off guard by the high costs associated with long-term care. Then, family (usually their spouse or children) is responsible for coming up with the money to pay for this long-term care, which may come out of emergency funds and future inheritance. By purchasing a long-term care insurance policy, you take control and relieve your loved ones from this burden.
There are many Long Term Care insurance features and benefits. Creating the right coverage for you will depend on several factors. A few of those factors are considered below.
- How much daily or monthly benefit do you need? Choose from $50-$350 a day or $1,500-$10,000 a month.
- How long should your minimum benefit period last? The longer the minimum benefit period the more expensive the coverage. For example, a 5-year minimum benefit period will cost more than a 3-year minimum benefit period.
- How long of an elimination period are you comfortable with? Typical options are 0, 20, 30, 60, 90, 180 or 365 calendar days. You must pay out of pocket for expenses prior to the end of the elimination period.
- Do you need inflation protection as part of your long term care insurance? Your premium will increase but so will your coverage. With high inflation rates currently hovering around 4% for nursing homes, a long term care insurance inflation rider may just be what you need.
- Does your long term care insurance come with a waiver of premium rider? Some do, but not all. A waiver of premium rider will waive all premiums after a set period laid out in your policy. It is good to know if your policy has a waiver of premium rider and how long after qualifying for your long term care insurance benefit until the rider goes into effect.
The potential cons associated with a hybrid long term care life insurance policy would be the costs over your lifetime. This is why it is important to consider all your options when considering a long term care policy.
Is there a difference between LTC insurance and Chronic Illness insurance?
There are a few major reasons why long term care insurance is superior to Chronic Illness insurance.
Probably one of the most important reasons is that a chronic illness rider requires that the insured be permanently disabled. Alternatively, long term care insurance typically goes into effect after the required waiting (elimination) period, regardless of the long term prognosis of the insured. The elimination period on long term care rider varies by state.
There are two IRS approved classifications: 101(g) or 7702B. Chronic Illness riders fall under 101(g) and Long term care riders fall under section 7702B. The main thing to know is that benefits paid for permanent and temporary long term care services under section 7702B are tax-free.
What happens if I never need long term care but have purchased a long term care insurance policy?
The last thing anyone wants to do is spend money on something they never use. The same is true for life insurance long-term care insurance. If you purchase a long-term care hybrid policy and never actually need long-term care, most life insurance companies have set it up so that the money you’ve paid in for the rider will ultimately be rerouted to your regular life insurance coverage, and your beneficiaries will receive the full death benefit amount.
Do I need to buy long-term care insurance?
Whenever we discuss what type of life insurance policies to buy, it’s impossible to make blanket statements like “Yes, you should buy a long-term care hybrid policy.” These customization options make sense for some but not for others.
Going back to our car options example, you probably won’t buy a car with fancy leather seats if you have toddlers, but you might if you don’t. Like car decisions, life insurance decisions are very personal and depend completely on your needs.
Ultimately, whether or not you should buy long term care insurance will depend on why you believe you need it and if you will be able to afford it.
What alternatives are available to pay for long term care?
It should be noted that social security and health insurance generally do not provide for expenses from long term care.
One option is to self fund your long term care. However, long term care is very expensive, with future estimated costs with inflation being well over $100,000 a year. Another option would be to transfer the burden to family. Neither of these should be considered viable options.
People think that Medicare will cover their long term care costs. However, Medicare only covers the first 100 days of care in a hospital if you meet certain health criteria. And since long term care is more focused on providing service for your personal care due to an inability to accomplish activities of daily living, medicare is not a long term care option.
Medicaid does provide support for long term care services, but it has restrictions. Medicaid requires that the individual receiving government financial support has no more than $2,000 in assets. So what happens is, the person trying to qualify for Medicaid must "spend down" their assets to that threshold level in order to be eligible for Medicaid. And there are many laws in place that prevent you from simply transferring your assets away to your kids or to a charity after you need Medicaid, making Medicaid a poor alternative to long term care insurance.
If you cannot get long term care life insurance due to a pre-existing condition you may need a second opinion. Some pre-exsiting conditions are looked at differently based on the particular LTC insurer you are applying with. This is another reason why having options is the only way to truly shop for the best long term care insurance companies and policies. You may find a great policy but due to your health history you cannot qualify. Rather than give up hope, you may be eligible for a different insurer who has more liberal underwriting.
How can I figure out what kind of life insurance coverage I need?
Whole Life with long term care rider
Under this option, you get the benefits of whole life insurance such as,
- Cash value
- Fixed Premiums
- Lifetime death benefit
And the additional peace of mind from long term care insurance.
Universal life with long term care rider
Under this option, you get the benefits of universal life insurance:
And the additional peace of mind from long term care insurance.
Second to Die Combo
One way to structure a hybrid life+LTC combination policy is to purchase survivorship life insurance on you and your spouse. You and your spouse share in the LTC benefit and leave an inheritance to your beneficiaries when after the surviving spouse dies.
This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting, or specific advice to your situation.