What are the alternatives? If you have not researched today’s annuities or life insurance with long-term care riders, it is worth your time. Products with these riders have the potential to protect and grow your cash value while offering ongoing income payments with the added protection of long-term care benefits.
While it would be beyond the scope of this article to review every possible product with long-term care riders, there are common benefits offered by these types of annuities and life insurance. Typically, insurance companies which provide long term benefit riders will often categorize an illness as either chronic or terminal. Depending on which type of care is needed the benefits will vary. Some life insurance and annuity policies will allow you to access your entire cash value penalty-free if you are confined to a care facility or diagnosed with a terminal illness. Some policies which have “income accounts” will pay for long-term care expenses (up to 6 or more years) without depleting your cash value. Some annuities can double or triple your cash account balance from day one to be used for various long-term care needs.
While these annuities or life insurance policies with long-term care riders are NOT long-term care insurance, they can often be an effective alternative to buying traditional long-term insurance. Keep in mind that if you start a long-term care policy at an advanced age, the premiums for a LTC policy could end up costing more than the care needed. A critical decision is to discuss your specific situation with your financial planner or insurance agent who can make the appropriate recommendation and find the right products for your needs.
Remember that annuities and certain life insurance policies do offer a guarantee of funds which are backed by an insurance company. For example, utilizing fixed annuities (and a form of fixed annuities called “fixed indexed annuities”) which offer chronic and terminal illness riders can provide LTC benefits without depleting your annuity’s cash value and still provide you with monthly income. This is important because without a guarantee of funds your savings could be consumed, or your income/benefits could be substantially decreased. If you end up in the middle of a health crisis, the last thing you need is to worry about is whether the money will be available at the time care it is needed.