If there’s one thing that’s a given in life, it’s that the unexpected happens. Along with having a life insurance policy, many people are exploring other options for long-term planning to address life’s uncertainties.
While traditional long-term care insurance is one option, others are seeing the benefits of obtaining life insurance with a long-term care or chronic illness rider. These riders create a way to use a specified amount of a policy’s death benefit to cover long-term care costs.
Understanding Long-Term Care and Chronic Illness Riders
Although they both aim to assist with long-term care, each rider has distinct characteristics. Chronic illness riders allow for monthly, semi-annual, or annual lump-sum payments to assist with care for a permanent illness that limits one’s ability to complete at least two activities of daily living. A chronic illness must be certified by a physician.
A life insurance long-term care rider is a broad, flexible option that can be used multiple times. It offers a range of benefits to cover temporary or long-term situations that last a minimum of 90 days. Payments come as expense reimbursements. Depending on the policy, one can access a percentage of the death benefit or the entire amount.
Benefits of Using Life Insurance for Caregiving Needs
Leveraging qualified plan assets
The cost of long-term care continues to rise steadily. One strategy to mitigate out-of-pocket expenses is tapping into retirement funds. When using income or assets to cover care costs, individuals may initially face income taxes or taxable gains. However, utilizing an insurance policy provides an avenue for receiving income tax-free benefits, thus reducing the need to factor in taxes during the planning process.
Tapping into highly taxable annuities
Life insurance riders provide the flexibility of an annuity payout while still ensuring protected coverage for long-term care needs. Like an annuity, you get a reliable income stream to cover care costs, which helps protect one’s financial future.
Estate planning and tax efficiency
Estate planning is important for any business owner. Including long-term care is becoming increasingly easier. A long-term care rider offers people another solution for enhancing their financial strategies. These riders create a pool of money for care throughout a lifetime, which protects assets. When combined with a trust, it can further eliminate estate tax issues.
The Role of Financial Planning
As the insurance world has evolved, it has changed into one designed for flexibility, with a focus on crafting insurance policies to meet individual needs. Those needs also mean planning for one’s financial future.
Working with a financial professional can help you maximize the different tools available, including life insurance. While developing a retirement and estate plan, a financial expert can help you integrate long-term care coverage into your future plans.
At some point in life, many people will require some form of caregiving. Life insurance offers another solution to solidify your financial well-being while establishing a plan for potential long-term care and ensuring loved ones are taken care of in the future.
About BTC Insurance Services
Founded in 2011, BTC Insurance Services has proudly served Utah businesses with comprehensive and custom-tailored insurance coverages for a decade. We pride ourselves on fostering long-term client relationships with a personalized and hands-on approach and have established a reputation built on quality and transparency. For more information about our products and services, we invite you to contact one of our reputable agents today at (855) 944-3457 or send us a message here.
