|
Description |
Advantages |
Limitations |
| Single Premium Life Insurance Policy |
With this type of policy, a single premium is paid (i.e., a lump-sum deposit), and that deposit purchases a death benefit (like any other life insurance policy). Minimum deposits could be in the $10,000 to $20,000 range. But considering current costs, a deposit in the range of $100,000 would be more advisable for a 60-year-old couple. |
At least double the amount of your deposit becomes immediately available to you for LTC should you require it. The longer you have the policy without filing a claim, the longer your benefit period will be. Some policies offer an option that provides benefit payments for an unlimited number of years. |
Not all policies allow the insured to purchase extra inflation protection. This type of policy can be more expensive than other funding methods. |
| Accelerated Death Benefits |
Some life insurance policies let the insured take cash advances against all or a portion of the death benefit to pay for expenses while the insured is still living. |
You can use the cash any way you choose. It does not necessarily have to be used for paying LTC costs. |
Not all policies address inflation. This can be a problem because costs for LTC continue to steadily increase at a rate that may make the cash obtained from such a policy inadequate for your needs. Also, there are other limitations, including a reduced death benefit. |
| Reverse Mortgages |
If you have paid off a substantial portion of the mortgage on your home, you can use your equity to pay for LTC, or to purchase LTC insurance. These home equity loans are in the form of “reverse mortgages.” |
The loan doesn't have to be paid until the borrower dies, sells the home, or moves. The cash is available to homeowners tax-free and can be distributed in monthly payments over several years, or over a lifetime, while the person still owns the home. |
This funding method offers no allowance for inflation's impact. The amount you receive is determined by the amount of equity you have in your home and other financial factors. It is not driven by a careful estimate of your projected LTC costs—so it could potentially fall far short of your real funding needs. |
