Bruce Sackrison

Bruce Sackrison is a Napa Valley Register columnist who will write about property and casualty insurance matters.

If you decide to shop for long-term care insurance, you’ll need to choose between types of policies.

In this final article of the series, I’ll help you better understand that choice.

The stand-alone policy

A traditional approach to long-term care coverage is a stand-alone policy. This type of policy covers only long-term care. It’s not attached to any other policy.

A stand-alone policy is a simple and straight-forward proposition. It also provides policy flexibility.

You can choose your daily benefit, a length of months (or years) payable, and a “time-deductible” called an “elimination period.” These all can help you craft a solution within your budget.

But as a reader reminded me a few weeks ago, these types of policies have recently seen premium increases... even on existing policies. That’s because of how these policies are structured. These traditional types of policies allow for rate increases after the policy is issued if overall claims experience show that a rate increase is necessary.

However, the unique benefits may outweigh the risk of a rate increase. A stand-alone policy should still be considered when planning for future long-term care needs.

A long-term care ‘rider’

In recent years, the insurance industry has developed a new way to cover long-term care needs. It’s accomplished by issuing a “rider” (or add-on) to a permanent life insurance policy.

I’ll simplify this, so please refer to specific policy language before making a final decision.

For an additional premium, you can add a feature to your life insurance that pays you cash when you become eligible for long-term care.

There are two major advantages to this type of policy:

The first advantage is that your premium won’t go up. That’s because when benefits begin, the rider pays out a set percentage (typically 2 percent) of the face amount of the life insurance policy each month.

Here’s how that works:

You purchase a $200,000 permanent life insurance policy with a long-term care rider. Later on, you require long-term care.

You are eligible to receive two percent of the face amount each month ($4,000) until the face amount is exhausted. The proceeds are deducted from the face amount of the policy.

In short, your life insurance policy is paying out an accelerated death benefit.

The second advantage is that the entire face amount will eventually be paid out to you, as long as the policy is in force.

So, if you never require long-term care, the policy will still pay the face-amount upon death, or it will “mature” and pay the face amount to you or your estate while you are alive.

If you require care for only a short period of time, the amount paid out will be deducted from your death benefit; the remainder of the face amount is still available for your heirs.

If you require long-term care for an extended period of time, your estate is protected, and you will have money to make the best choices possible for your long-term care.

Which policy is best?

There is no simple answer to that question.

Your financial goals, your budget, and your tolerance for risk will be part of that decision. A local agent can help you craft a unique solution that’s right for you.

If you don’t have a local agent, I’d be happy to answer any questions you have. I specialize in long-term care insurance. Send me an email or call me. I’d be happy to answer your questions with no obligation.

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Bruce Sackrison is an insurance property and casualty broker affiliated with Professional Insurance Associates. He is at 707-931-0186 or bruces@sackifs.com.