Types of Long-Term Care Insurance
Individual policies make up the bulk of long-term care policies. These policies are sold directly from an insurance company, and they often require a medical exam. New York Life, Mutual of Omaha, and Lincoln Financial Group are a few insurance companies that offer long-term care insurance policies, and they can often be bundled with other policies for discounted premiums.
Life Insurance policies and annuity contracts
If you already have a life insurance policy, you may be able to withdraw from the policy to pay for long-term care. However, taking money out of your life insurance policy may impact the death benefit amount so talk to a trusted financial advisor before doing so. If you no longer need a life insurance policy, you can surrender the policy and use the accumulated cash value to pay for long-term care.
You may also withdraw cash from annuities, a financial product designed to provide cash flow to retirees, to pay for long-term care. There is sometimes a charge but companies may waive this fee if the money is for long-term care.
Life insurance riders
Some life insurance policies and annuities offer a “rider” or an additional coverage option that helps pay for long-term care. The rider works by allowing people to use their death benefit while they are still living to pay for long-term care. Most companies require that a doctor certify individuals have a chronic illness that requires long-term care in order to access the death benefit.
Some workplaces offer long-term care policies to employees, retirees, or their family members. These policies are often offered at a discounted price and may have tax incentives. Additionally, employees may not have to get a medical exam in order to purchase this type of policy. Most of these policies are voluntary, and employees must pay the entire premium; however, the premium is often less expensive than an individual plan.
Federal and state-based policies
Federal and state employees and retirees (including active or retired uniformed service members) and their dependents may access long-term care insurance through the Federal Long Term Care Insurance Program. This program often offers lower premiums than individual policies.
Tax-qualified insurance policies allow individuals to deduct all or some of their monthly premiums as medical expenses in certain circumstances. Many federal and state-based policies are tax-qualified along with some individual plans and riders. Ask your financial advisor or insurance agent about possible tax deductions before purchasing a policy.
Many associations (such as the AARP) partner with insurance companies to offer long-term care policies to their members. These policies are sometimes offered at a discounted price and allow members to choose benefits.
Pro Tip: When choosing a policy through an association, keep membership dues in mind to see if you’re really saving money by purchasing the policy.