Life Insurance Policies
Most life insurance policies don’t cover long term care costs, but some insurance
companies offer long term care riders that provide long term care benefits as a
percentage of overall insurance. Contact your insurance provider for details.
Three other options related to life insurance can help. All three may be especially
attractive options for those who don’t qualify for long term care insurance. Keep
in mind that none of these options protect against rising long term care costs due
to inflation.
Accelerated death benefit: An addition to your life insurance policy that enables
you to receive cash advances against your policy. It’s a useful option if you have
a terminal illness, require permanent nursing-home care, or can't perform activities
of daily living.
Viatical settlement: The sale of your life insurance policy to a third party for
a single cash payment that’s less than the policy’s face value (usually 50 to 80
percent). The amount is usually based on the remaining life expectancy of the seller
(usually less than 5 years). When you die, the third party gets the full death benefit.
Life settlement: Allows you to sell your life insurance policy for the present value.
A life settlement is usually obtained when your original reason for the life insurance
policy no longer exists. The money from the sale of the policy can then be used
to finance your long term care needs.
Contact your insurance provider to determine whether you can use any of these options
to pay for long term care. You can use our checklist to help identify how much coverage you might need.
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Advantages |
Disadvantages |
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Accelerated death benefit |
Little or no additional cost.
You can use your life insurance policy to pay for your long term care, or to leave
a death benefit to your heirs.
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Reduced value of life insurance policy might not be sufficient for long term care.
Compared to long term care insurance, the monthly benefit from an accelerated death
benefit policy might be lower, and the coverage period is usually shorter.
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Viatical settlement |
Payment can be used immediately to pay for long term care, and it may be tax-free.
After making the settlement, you don't need to continue paying premiums.
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You will not get as much money from a viatical settlement as your heirs would receive
from your death benefits.
If you live longer than expected, you might not receive enough money from the viatical
settlement to pay for your long term care needs.
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Life settlement |
You can use the money from the sale of your life insurance policy to pay for long
term care needs.
If you don't need long term care, your heirs can receive the life insurance proceeds.
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The money you get from selling your life insurance policy is taxable. For more information,
contact the IRS.
You may not get enough money from selling your life insurance policy to pay for
all of your long term care needs.
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