Accelerated Death Benefits is a provision of a life insurance policy (whole life, universal life or variable life or any combination of these) that helps in giving you money to pay for long-term care needs. Accelarated death benefit riders give the policyholder the ability to access the policy’s death benefit during his or her lifetime to help pay for assisted living, at-home care, or nursing home care.

One of the advantages of this type of rider on your life insurance policy is that you have money to help with long term care but if you don’t ever use that long term care benefit the policy is still useful to you. You still have the death benefit to help your family when you die. If you buy a long-term care insurance policy but don’t need it all the money you paid in premiums is wasted. Ofcourse it is not really wasted since you would have the insurance protection and not have to worry about the rising cost of long term care.

Any amount of money you take out of the policy during your life will reduce the amount of the death benefit available when you die. Still though many people like this arrangement because they believe they are covering their potential need for long-term care while also providing money for their family.

You can also use this policy as a source of extra money during your lifetime. You can actually borrow money from your policy and if you don’t pay it back, the amount is simply deducted from the amount of your death benefit.

A common life insurance policy with a long-term care rider will have a universal life or variable universal life insurance policy as a base, with an accelerated death benefit rider that lets you take 2% of the death benefit per month. Some policies will say that you can not reduce the death benefit below a certain amount. Some policies also include an additional provision that will extend the long-term care benefits after the policy limits have been met.

To give you an idea of cost lets use the example of a 300,000 universal life insurance policy for a 65-year old woman. The annual premium would be $6,447 without a long term care provision. With a long-term care rider, the cost increases by only $302.

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Most people who want to provide for long-term care have a good amount of assets but not everyone has enough monthly income available to pay those long-term care insurance premiums. Many people are discovering that private funding, reverse mortgages or long-term care insurance do not work with their financial situation. What are the alternatives to long term care insurance?

Life insurance is one of the alternatives. To understand how this works you must first have a basic understanding of how life insurance works. For a simple easy to understand explanation of the various types of life insurance see our previous post Types of Life Insurance Policies

One of the alternatives to long term care insurance is to use a viatical settlement firm:

A viatical settlement company can buy your life insurance while you are alive. The company becomes the beneficiary of your policy and continues to pay the premiums. You get a lump-sum payment while you are alive that you can choose to use for long-term care needs.

The amount that you receive from a viatical settlement company ranges most often from 10 to 50 percent of the actual value of the policy. The amount you receive depends primarily on your life expectancy – the shorter your life expectancy the higher percentage of your policy’s death benefit you likely to receive.

Here is what you need to look out for with viatical settlement firms. Only about half of the states regulate viatical settlement companies. Even in the states that do regulate there are “bad” companies who will try to cheat you.

Your best bet is to talk to your agent and get their advice about viatical settlement firms.

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