Creative Ways To Address Long-term Care Risks

It’s one of the most common financial concerns we hear among those getting ready to retire – What do we do about the risk of long-term health care costs?

Unfortunately, the answer isn’t an easy one. The variables present in answering this question, and the potential ways to address the risk, are seemingly endless.

Adding to the complexity is the fact that many traditional long-term care insurance policies have become expensive, restrictive in benefits, or both, in recent years for a variety of reasons.

You may have even received a letter about your existing long-term care insurance policy, informing you that you need to make a decision about a reduced benefit.

So, what other options are there?

Take a look at your existing estate plan. Specifically, how are your assets and insurance policies owned? The owner, joint owner (if applicable), beneficiary, state of residence and registration all make a difference, and impact the financial implications of paying for long-term health care.

Certain trusts are often marketed towards protecting assets from the risk of long-term health care costs. However, you do not always need a separate trust just to protect against this risk. If you haven’t spoken with your wealth advisor and estate attorney about financial implications if a long-term care event were to happen today, now is the time. Discussions should begin with the least expensive, most effective solution first and scale from there.

There are countless other ways to address long-term care needs. In the interest of brevity, though, this article will focus on a specific product that can be beneficial in the right scenario at the right time.

The product I’m referring to is a life insurance policy with a long-term care rider. A rider is a fancy word for an additional benefit on the same life insurance policy. The mechanics are simple: You have a standard life insurance policy. The owner pays premiums, and in the event of the insured’s death, the beneficiaries receive a lump sum death benefit. Then, you add the ability to access money from the same insurance contract, in the event the insured needs to pay for specific long-term health care costs.

Under the right circumstances, these policies can provide the insured with two valuable benefits on the same insurance policy. This is attractive to those who don’t want to be paying premiums for a traditional long-term care insurance product they may never use, or may never get their money back out of. Unfortunately, we all do pass away at some point. If you pass away with an in-force life insurance policy then you can be assured the benefit is going to get paid to your beneficiaries. Life insurance policies with a long-term care rider can be one way to make sure that some premium dollars are going to either you or your beneficiaries.

For those looking for a “happy medium” solution to both life insurance and long-term care insurance needs, a life policy with a long-term care rider is worth exploring.

While convenience and simplicity are appealing, there are still variables that need to be carefully considered by you with the help of your trusted wealth advisor. These variables can be grouped into one easy formula: cost vs. benefit. What exactly will the policy cost and how exactly is the money going to be accessed?

By carefully considering the costs and benefits of a life insurance policy with a long-term care rider, you may uncover a solution you were not aware of before. As with anything else, it is not for everyone and it is important to evaluate how this type of product would fit into your current financial plan. We welcome the opportunity to discuss this further with you and help determine the best way for you to address all of your financial priorities and goals.


Casey Pisano, CFP®
Wealth Advisor