Planning for the future is an easy thing to put off. You may think you’re too young or healthy to worry about things like life insurance or long-term care (LTC), but that’s not really the right way to frame the mindset. The reality is, without working with your financial professional to properly plan for your future, your loved ones may suffer the most. When it boils down to it, life insurance and LTC are about love for your family and their financial and emotional well-being. So, which one is right for you and your family’s current situation? Let’s explore the options.

 

Long-Term Care Insurance or Life Insurance?

It’s vitally important to consult your financial professional before making any decisions on which policy or policies you wish to implement. With that said, this article is meant to inform you about the benefits of life insurance and LTC, and how they may be right for you and your family’s situation.

There are several reasons—depending on your situation—where life insurance or LTC insurance may be right for you and your family. Throughout your lifetime, there may be a need for life insurance or LTC insurance at different times.

Life insurance is often considered most important during your working years when you may have children and a larger family the relies on your income to live. LTC insurance, on the other hand, is generally needed later in life. According to the American Association for Long-Term Care, it’s usually best to buy LTC between the ages of 52 and 64, since policy rates climb the older you get. Plus, by your later years, life insurance can become obsolete as your children grow into adults or your family’s reliance on your income has waned.

 

Life Insurance

In a nutshell, life insurance protects your loved ones once you’re gone. It creates an instant estate that financially protects your family when you pass away. With a life insurance policy, your beneficiaries receive a payout that helps cover any lost income or funeral expenses.

Depending on the policy, life insurance can also provide estate liquidity, replace a banker for most loans, build tax-friendly wealth, provide continued business success, and can even help pay for LTC insurance or a chronic illness. Life insurance is perhaps best to be in its own asset class in your overall portfolio.

 

Long-Term Care Insurance

Different from traditional health insurance, LTC insurance is intended to cover and support any care or services needed to cover everyday activities, extended care needs, chronic illnesses, or disabilities. Whether you prefer care in your own home, a community institute, or nursing facility, LTC insurance will help you and your family get refunded from the daily expenses incurred from care.

Did you know that by the time you reach 65, there’s nearly a 70% chance you’ll need some sort of LTC insurance someday? And as the average cost of care continues to rise each year, how would you and your family pay for it? Would you put the burden on family members to become your primary caregiver?

 

 

Reasons to Consider Life Insurance Policies

1. You can protect your family and loved ones.

Like it was stated above, if your family relies on your financial support for their happiness and livelihood, life insurance is a must. Above all else, this is why life insurance exists. It not only helps cover your income, but it can also help your family provide for themselves after you’re gone. That can include additional daycare services, household tasks, or anything else a family may need.

2. Ensure that your business survives.

Do you own a business or involved in a partnership? Do you care about your employees’ well-being? If you answered “yes” to any of these questions, then there’s a good chance you’d benefit from both a personal policy and a business life insurance policy. It’ll help all those years of hard work not go to waste and will keep your company’s future intact.

3. Diversify your portfolio.

With universal life policies, you may utilize the cash value earned within your policy. Universal life policies are tied to certain investment products set by the insurance company, so you as the policyholder may receive dividend payments based on the underlying market performance. As with any financial tool, consult with your financial professional to understand the potential risks involved before committing to a policy.

4. College planning.

Many people are unaware that a life insurance policy may be used to save money for their child’s education. But in reality, life insurance payouts may provide an excellent supplement to pay for a child’s college expenses. And if your child must borrow money to get through their schooling, the insurance payments may help pay down those loans.

 

 

Reasons to Consider Long-Term Care Insurance

1. It may be difficult for family members to provide care.

Depending on your family members’ ages, locations, and careers, you may be out of luck finding a family member who could be an unpaid caregiver. Caregiving in itself can be a full-time job, so the chances are it’ll be more difficult for family members to provide the care you need should you ever experience an extended care event.

2. You prefer the freedom of choice.

One great thing about having LTC insurance is that you not only will have access to quality care, but you can choose how and where you receive that care. Unfortunately, if you don’t have an LTC policy in place, you won’t have as many quality options.

 

3. Care expenses continue to rise.

No matter if you receive your care in-home or in a nursing facility, LTC costs continue to skyrocket. According to Genworth’s 15th Annual Cost of Case Survey , here are the annual national averages for cost of care in these particular settings:

• Assisted living facilities: $48,000
• Semi-private nursing homes: $89,297
• Private nursing homes: $100,375

 

What’s more, the average annual increase for these care settings falls between 3% and 6.67%, meaning costs will only exacerbate each year.

4. Help protect your loved ones’ finances.

Like you, your family members have spent their whole life accumulating assets to build their net worth and retire happily. However, if you fail to plan properly, your family may be footed with your extended care bills, crippling their financial wellness. By purchasing an LTC policy, you won’t only gain peace of mind, but your loved ones will, too.

 

A Combination Policy?

One of the more significant risks of buying an LTC insurance policy is that there’s a chance you may not ever need to use it. However, there’s an attractive alternative if you prefer coverage for both life insurance and LTC without that risk.

Hybrid LTC and life insurance policies can pay for care that Medicare or regular health insurance don’t cover. And if you don’t max out your LTC benefits, then your loved ones will receive compensation after you pass away. Combination policies can be appealing because you’ll receive something for your premiums paid no matter what, making it a potentially great investment.

 

Closing Thought

No one knows what the future holds. Your financial professional can help you weigh the risks you and your family face to find the right solutions for your situation. With life insurance, LTC insurance, or a combination of both, you can be better prepared for life’s uncertainties; and your family will be forever thankful.

 

 

Securities offered through SCF Securities,Inc. Member FINRA/SIPC 155 E. Shaw Ave. Suite 102, Fresno, CA 93710 • (800) 955-2517 •Fax (559) 456- 6109. SCF Securities, Inc. and Creative Financial Strategies LLC are independently owned and operated. www.scfsecurities.com Note: Securities offered through SCF Securities Inc., Investment Advisory Services offered through SCF Investment Advisors, Inc. The content within this article is for informational and educational purposes only and does not constitute legal, tax or investment advice. Customers should consult a legal or tax professional regarding their own situation. This document is not an offer to purchase, sell, replace, or exchange any product. Insurance company products and any related guarantees are backed by the claims paying ability of an insurance company. Certain insurance company product applications are vetted through an underwriting process set forth by the issuing insurance company. Some applications may not be accepted based upon adverse underwriting results. Some types of permanent life insurance may require consistent premium payments, or the policy may risk lapsing. Unpaid policy loans decrease future death benefits paid to beneficiaries. Excessive policy loans may cause the need for future premium payments. If a contract lapses due to excessive policy loans or if a customer surrenders their policy, one may be subject to tax payments for policy loans that exceeds the premiums paid. Excessive premium payments may cause the policy to become a modified endowment contract. Policies classified as modified endowment contracts may be subject to taxes when a loan or withdrawal is made.

Sources:

https://www.uphelp.org/life-insurance-vs-long-term-care-insurance-which-do-you-need

https://longtermcare.acl.gov/the-basics/how-much-care-will-you-need.html

https://smartasset.com/life-insurance/top-ten-reasons-to-buy-life-insurance

https://newsroom.genworth.com/2018-10-16-Genworths-15th-Annual-Cost-of-Care-Survey-Shows-Continuing-Rise-in-Long-Term-Care-Costs