According to US Department of Health and Human Services, at least 70 percent of people over age 65 will require some long-term care at some point in their lives. That should alert you. Next question is how much long-term care would cost. Well, nursing home costs in California averaged $290 a day in 2017, with the annual cost of care close to $110,000. A lot of people think Federal Medicare insurance plan covers long-term care. Unfortunately, it doesn’t. Only if you spend down all your savings to reach the level to be eligible for Medicaid (MediCAL in California), then the State will help to pay for your long-term care cost.
Therefore, it is very important to plan ahead by purchasing a long term care insurance policy. What are the choice? There are 3 options. First, a stand-alone long-term care insurance policy is very straight-forward, but it has some drawbacks. The biggest one is that if you never use it, you lose it. Therefore, these product are not very popular and some of the carriers such as Prudential left this market space.
Secondly, there’s life insurance with long-term care rider. We are not talking about chronic illness rider. [Please refer here for the difference.] Nationwide and AIG offer such product. Take a 58 years old male, standard non-tobacco for example. Using AIG’s QoL Value+ Protector with its Accelerated Access Solution® rider, he pays $2,000 per month for 7 years to receive $500,000 death benefit / long-term care benefit. The policy is guaranteed for 24 years and can last till he’s at age 121. The good thing about this option, as opposed to the stand-alone LTC, is that if he does not need long-term care in life, the death benefit is always available and can grow to $742,799 at age 98.
| 58 years old male, non-smoker | AIG’s Value+ Protector with Accelerated Acess Solution® |
| Total Premiums | $167,308 |
| Monthly Premiums in 7 Years | $2,000 |
| Long-term Care Benefit Payment method | indemnity |
| Long-Term Care Benefit Limits: | |
| Monthly | $10,000 (2% of LTC benefit) |
| Annual | $120,000 |
| Total | $500,000 |
| Benefit Duration | 50 months |
| Initial Death Benefit Amount | $500,000 |
| Death Benefit Amount at age 98 |
$742,799 |
The third option is a hybrid product. Lincoln Financial’s MoneyGuard® II and Nationwide’s YourLife CareMattersSM are the popular ones. If you are older than 70, life insurance with long term care rider mentioned above is not a good choice. Instead hybrid product makes better sense. Please see the following example, in order to receive monthly LTC benefit of $9,000 for 4 years, comparing the 2 carriers mentioned here. Please compare these numbers with those above, and you will know the earlier you plan, the better deal you can get.
| 71 years old female, non-smoker | ||
| Lincoln Financial’s MoneyGuard® | Nationwide’s YourLife CareMattersSM | |
| Total Premiums | $200,650 | $234,482 |
| Annual Premiums in Years 1-5 | $40,130 | $46,896 |
| Long-Term Care Benefit Payment method | reimbursement | Indemnity |
| Long-Term Care Benefit Limits: | ||
| Monthly | $9,000 | $9,000 |
| Annual | $108,000 | $108,000 |
| Total | $432,000 | $432,000 |
| Benefit Duration | 4 years | 4 years |
| Specified Death Benefit Amount | $216,000 | $216,000 |
| Return of Premium starting 6th year | $160,520 | $234,482 |
If you are under 55, the aforementioned life insurance with chronic illness rider is a better choice, because it is a free add-on rider. It is one of the benefits by having a life insurance, in addition to getting protection for family or business, and accumulating cash value for tax-free retirement income.
* Please note that the numbers illustrated here are for reference only. They need to be accompanied by the actual illustration documents in their entirety. Please contact us for detail.