How do I determine if long-term care insurance or life insurance is better for my family?

I want my family to be protected in case of death. How do I determine which one is better for me and my family? What are the differences between the two?

Life Insurance, Long-Term Care Insurance
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March 2017
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Selecting an insurance policy that fits your needs is a very personal decision and you need to consider many factors such as health, budget, age, family medical history, temporary need (think college or pay off the mortgage) or long term need, etc. Temporary needs can be satisfied with a term policy or coverage for a certain time frame, 1, 5,10, 20, 30 years. Term policies are usually very inexpensive when you are younger and get progressively more expensive over time. Generally, the term policies are not available for people over 70 or maybe up to 80 years of age. A policy for your entire life can be covered by a permanent policy such as, Whole life, Universal life, Variable universal life to name a few. Permanent insurance, once you have a permanent policy and pay your premiums, the company cannot cancel it or change your premium, unless they change the premiums for all the people that hold that type of policy. A thought to remember is that underlying insurance for all policies gets more expensive as you get older. So in a very basic way, a 10 year level term policy adds up your 10 annual premiums and divides by 10 years to get the average cost that is charged each year for a level term policy. A permanent policy acts the same way, but over the expected lifetime of the insured. The cash build up in the earlier policy years in a permanent policy is used to offset the higher costs much later.

The traditional Long Term Care policies coverage became effective if you needed assistance in your home or other type of facility when you could not perform at least 2 activities of daily living. The policies were just to cover these chronic types of situations and most would not cover you for death. They are/were expensive for the chance of probability you needed the coverage. If you did not use the benefits, you did not get a return on your investment. Similar to car insurance, if you never had an accident or crashed your vehicle, you just paid your premiums on the chance that you might need collision coverage.

For several years, there has been a hybrid or newer generation of policies that cover not only cover death, but LTC, with the thought that one way or another you get a benefit. The differences are the benefits paid are capped so the insurance company can put a limit to their liability.

Which one is better for you really depends on what you want to achieve over the short and long-term. If you want coverage in case of death to cover your family and if you have a long life and are worried about the possibility of needing some assistance with the ADL's at home or at a facility, a hybrid policy may be more appropriate. I suggest you research and look at the hybrid policies. Contact a few different life insurance companies and get a few quotes. Research the policies and prioritize what you want, why, and match it to the policies and compare the features, benefits, and costs.

Costs can vary, so shop many companies. When dealing with insurance, matching a person to a company or product is an important factor that can be reflected in cost. One company may be willing to take more of a chance for less cost.

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March 2017