Geriatrics and Extended Care. Home; Services at Home and in the Community; Residential Settings and Nursing Homes; Paying for Long Term Care; For Caregivers; Well-Being; Making Decisions; Geriatrics and Extended Care; For Health Care Professionals; Locate Services, Resources, and Handouts; More Health Care. Veterans Health Administration; Health Benefits. Health Benefits Home. The Federal Long Term Care Insurance Program (FLTCIP) provides long term care insurance for its enrollees, who are Federal and U.S. Postal Service employees and annuitants, active and retired members of the uniformed services, and their qualified relatives.
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The biggest risk of buying long-term care insurance is that you might spend tens of thousands of dollars on something you won’t use. Policies pay for nursing homes, assisted living or home health care — but what if you never need these services? New types of policies combine long-term care insurance with permanent life insurance, such as whole or universal life.
If you want both types of coverage and can front the money, these hybrid options are worth a look. How combination policies work
Combination long-term care/life insurance policies pay for long-term care that regular health insurance or Medicare won’t cover. And if you don’t max out the long-term care benefits, the insurer pays a benefit to your beneficiary upon your death.
Also called linked or asset-based policies, combination products work this way:
Combination policies differ, but here’s a hypothetical example for a MoneyGuard II policy from Lincoln Financial: A 60-year-old female nonsmoker pays a single $100,000 premium for up to $453,783 in long-term care benefits, or almost 4.5 times the premium. Long-term care benefits could pay out for up to six years, at up to $6,303 per month. If she never used the policy for long-term care, it would pay a death benefit of $151,261 to her beneficiary. And after year five, she could get her $100,000 back if she didn’t want the policy any longer and hadn’t used any of the long-term care benefits.
Sales of combination long-term care/life insurance policies have taken off. More than 260,000 combination policies were sold in 2017, up from 15,000 policies sold in 2007, according to LIMRA.
The appeal of combination policies
Aside from the fact that you get something for your premium no matter what, the biggest advantages of combination policies are:
The downsides
A combination long-term care/life insurance policy is probably not for you if:
Get advice before you decide
If you do decide on a combination policy, compare quotes from multiple insurers, and check the insurance companies’ financial strength ratings before you buy. It only takes a few minutes to look them up on the websites of independent rating firms, such as A.M. Best, Fitch Ratings, Moody’s Investor Services or Standard & Poor’s Ratings Services. (You might have to register on some sites to access ratings, but registration is free.) The ratings agencies issue grades for insurance companies, and each agency has its own scale.
Combination policies are complex products, and their costs and benefits vary. Before you buy, talk with a financial advisor who understands these products and can compare them to stand-alone long-term care and life insurance options.
Barbara Marquand is a staff writer at NerdWallet, a personal finance website. Email: [email protected]. Twitter:@barbaramarquand.
Image via iStock.
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