Long-term care nursing homes started popping up in the 1970’s. Insurance policies soon followed, as companies began to offer traditional long-term care policies. But the insurance industry has undergone some revolutionary changes over the past 50 years. And polices can now cover you even if you receive care in your own home.

Let’s take a look at the three main options for coverage.

Traditional Long-Term Care Policies

Here’s how they work: You pay regular premiums, just like car insurance. The polices also work in a similar fashion – if you wreck your car, your car insurance might help you pay for the repairs; if have a long-term care event, that policy might help cover the costs.  Also, if you don’t wreck your car, you still pay for the coverage. Same with traditional long-term care policies – you use it or lose it.

While some companies still offer traditional polices, more and more carriers exit the business every year. Also, many policy holders have seen dramatic increases in their premiums, as the cost of care continues to rise.

Linked Benefits Policies

Here’s how they work: Your coverage is literally linked to another investment. You make a lump sum investment or an investment over a set number of years, usually into an annuity. The money invested creates a larger bucket of money that can provide coverage. For example, you invest $100,000 and receive $350,000 in coverage. Unlike traditional polices, it’s not a use-it-or-lose it proposition – if you don’t use it for care or change your mind about even taking out the policy, you can get a portion or all of your money back.  Also, you won’t experience premium increases in a linked benefits policy.

Life Insurance with a Rider Polices

Here’s how they work: You take out a permanent life insurance policy and add a long-term care rider. If you need long-term care, the rider will help pay for it; if not, then your beneficiary will receive the death benefit. Also, if the policy builds cash value over time, you may be able to withdrawal some cash to cover other expenses. As with linked benefits, you shouldn’t have premium increases unless the policy underperforms.

Which option makes sense for you? It just depends. Everyone’s situation is different. If you’d like to explore your options, let us know.