Would linked-benefit or combination life insurance products be the right choice for you?
Encouraged by rising nursing home costs and a scarcity of practical ways to pay for long-term care, more Americans are seeking out alternative ways to pay for future care needs. One increasing popular option is purchasing a life insurance that is coupled with long-term care benefits. The linked-benefit or combination life insurance products saw sales grow by 18 percent in 2013 and reached $2.6 billion in total new premium, according to LIMRA, an industry research organization. The increase, which has experienced double-digit growth for the fifth year in a row, due in part to the mounting popularity of linked benefit policies.
More people are turning to linked benefits because of the growing need for more low-cost options when it comes to long-term care insurance (LTCI). For some buyers, combination products are a more attractive alternative to stand-alone LTCI.
With linked benefits, also known as combination products, consumers can now attach a long-term care rider—an optional benefit—to a life insurance policy. This type of coverage allows people to use a type of life insurance as a flexible financial vehicle to help cover long-term care costs.
What are linked benefits?
A linked benefits policy combines death benefits with long-term care coverage under one contract. Combination products offer people yet another way to get protection from the costly consequences of a long term care event.
Under a combination life and long-term care policy, 
there is a designated face amount that
provides a tax-free benefit. With this type of policy, a maximum monthly benefit is determined and as living benefits are paid, the death benefits are reduced based on how much coverage is used.
Some linked benefit policies pay up to six times the initial premium to cover long-term care expenses. These policies can also pay as much as twice the initial premium in death benefits for beneficiaries if long-term care benefits are never needed.
Although more individuals are beginning to recognize the importance of long-term care insurance, some are still hesitant to buy something they think they may never need. To alleviate this concern, many policies have return of premium features, in which consumers have up to 15 years to change their mind, terminate the contract and get all of their money reimbursed. With this option, the consumer faces little risk and will always receive a benefit from the contract no matter what happens—be it a long-term care event, death or premium refund.
Some people choose to invest their excess funds in a CD account with the intention to pay for long-term care themselves should the need arise. However, investing that money into a linked benefit product may be a smarter option because it allows people to buy several products rolled up in one. It also gives consumers a guarantee they will get their money back whether they become ill or remain healthy. Many consumers are drawn to this option, as with the combination of both life and long term care insurance, it means that if you don’t use it (the long term care portion), you won’t lose it (as your beneficiaries will receive a death benefit on the life portion of the policy).
Who should buy a linked benefit policy?
Linked benefit policies are ideal for people who are avid savers and are planning to use nest eggs to cover long-term care costs, but would also like to leave a legacy behind for their heirs. This type of policy is also a good option for those who want to be prepared for a long-term care event, but don’t want it to limit their other spending desires.
In addition, combination products are well-suited for people who have the ability to reallocate a significant amount of their invested funds without running the risk of impacting their lifestyle for future retirement needs, as the this type of policy typically requires an initial investment of $75,000 or more per person.
Linked benefits provide an option for people to protect themselves using the same dollars they would use for a life policy, only they are better protected from the risks of a long-term care event. This type of life insurance gives consumers leverage, protection and control over their finances as well as their life.
No one can predict their future long-term care needs. However, developing a plan that includes long-term care insurance plays a key role in helping consumers protect their families from financial heartache. If the need for long-term care occurs, people without coverage are often forced to make the difficult decision of choosing which of their assets to liquidate in order to pay for care. Long-term care insurance is a viable way to avoid making those tough decisions.
This September, during Life Insurance Awareness Month, it’s important to remind everyone about how life policies can help cover the costs of long-term care. Similar to life insurance, long-term care coverage is all about securing the future regardless of death or needing care. When these two products combine, it helps consumers build an even stronger safety net for themselves and the people they love.
