Policies that combine life insurance and LTC insurance are referred to by different names including "Combination policies," "Bundled Policies," or "Accelerated Death Benefit Policies."
This type of policy is a life insurance policy with an LTC insurance rider that can be used to pay for long-term care expenses. In other words, instead of having to die to receive benefits, the policy could pay benefits to cover the cost of your long-term care expenses.
The attraction is that you can own insurance coverage, and always be assured that a benefit will be paid. Agents selling this type of insurance usually emphasize that "If long-term care is not needed, at least your beneficiary will receive benefits from the life insurance portion of the policy."
It’s enticing and can make it seem that you’re getting something for free – but we all know insurance companies do not "give away" insurance. With this type of policy, you are actually paying for two types of insurance coverage, whether you need both types or not: life insurance and long-term care insurance.
The attraction is that you can own insurance coverage, and always be assured that a benefit will be paid. Agents selling this type of insurance usually emphasize that "If long-term care is not needed, at least your beneficiary will receive benefits from the life insurance portion of the policy."
It’s enticing and can make it seem that you’re getting something for free – but we all know insurance companies do not "give away" insurance. With this type of policy, you are actually paying for two types of insurance coverage, whether you need both types or not: life insurance and long-term care insurance.
If you use the long-term care portion of a $150,000 life insurance policy, coverage is reduced proportionately. For example, if you use $75,000 of your benefit for long-term care expenses, your beneficiary would collect only $75,000 at your death. But you’ve paid a premium for $150,000 in life insurance benefits, as well as a premium for the long-term care insurance benefit.
It’s best to evaluate each of your insurance needs separately. If life insurance is appropriate, purchase the best life insurance value for your particular situation. If life insurance is not appropriate, then don’t purchase it at all.
The same is true for LTC insurance: If LTC insurance is appropriate, purchase the best LTC insurance value for your particular situation. If LTC insurance is not appropriate, don’t purchase it at all.
In other words, "bundling" more than one type of insurance in the same policy normally results in a poor insurance value.
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