Long-term care (LTC) is any personal assistance you need to maintain your quality of life as you get older. Chances are, you’ll need LTC at some point. The majority of us will. Some people think that long-term care only covers nursing home expenses. In reality, half of all long-term care services are provided in the home. Long-term care coverage was developed to help offset the cost of these services.

Firstly, health insurance doesn’t cover long-term care expenses. Medicare will cover some long-term care costs, but only up to 100 days (after a 3-consecutive-day stay in a hospital under treatment). Medicaid will cover long-term care expenses for individuals with assets of $2,000 or less (countable assets according to Medicaid regulations; varies by state) and covered care could be limited to a nursing home. Paying for care out of pocket isn’t practical or cost-efficient for many people.

A term life policy is exactly what the name implies: Coverage for a specific term or length of time, typically between 10 and 30 years. It is sometimes called “pure life insurance” because, unlike whole life insurance, there’s no cash value to the policy. It’s designed solely to give your beneficiaries a payout if you die during the term.

Most individual term policies have level premiums, so you pay the same amount every month. When the term expires, there’s no more coverage – you either have to go without or get a new policy, which will likely come at a higher cost: the older you are, the more expensive it is to get a policy. However, many providers – including Guardian – will allow you to convert a term policy to permanent life insurance for part or all of the coverage period. If you receive term life insurance through an employer, rates are typically issued “on attained age,” which means the rates will increase over time.

How many years will your family need financial protection? For most people, it’s until the kids are grown up, the house is paid off, and there’s some money that can serve as a safety net for the surviving spouse. read more »read less »

A whole life policy is the simplest form of permanent life insurance, providing coverage that lasts your entire life. Like other permanent policies, it includes a cash value component: A portion of your premium dollars are placed into a cash value account, and this sum grows over time on a tax-deferred basis, so you don’t pay taxes on the gains. Compared to other forms of permanent coverage, a whole life policy has three defining characteristics: 1) The level premium remains the same for life, 2) The death benefit is guaranteed as long as the guaranteed premiums are paid for life, and 3) The policy includes guaranteed cash values that grow at a guaranteed rate.

Cash value provides several significant benefits you can use while you’re still alive. It takes a few years to grow into a useful amount, but once that happens, you can borrow money against it, use it to help pay your premiums, or even surrender it for cash to live on in retirement.

When you get a whole life policy from a mutual company, your cash value can also earn annual dividends. You get a portion of the insurer’s profits, which can be used to increase the value of your policy and provide other benefits. read more »read less »

A universal life policy is another form of permanent insurance that offers the cash value and lifetime coverage benefits of whole life. But there’s a fundamental difference compared to whole life: the premiums are flexible.

With a universal policy, you can raise or lower the amount you pay into the policy as you see fit, within the limits of the policy. Paying in less could eventually result in the need to pay in higher amounts in later years to keep your coverage. This type of policy can adjust to your life circumstances while providing the same kind of cash value growth as whole life. Having another child, moving on to a different job, or taking out a loan to buy a business – all might be instances where a combination of security and flexibility becomes important. read more »read less »

With a universal policy, you can raise or lower the amount you pay into the policy as you see fit, within the limits of the policy. Paying in less could eventually result in the need to pay in higher amounts in later years to keep your coverage. This type of policy can adjust to your life circumstances while providing the same kind of cash value growth as whole life. Having another child, moving on to a different job, or taking out a loan to buy a business – all might be instances where a combination of security and flexibility becomes important.

Cash value life insurance is a permanent life insurance policy that builds a cash value that can be accessed during your lifetime for any reason. Both whole life insurance and universal life insurance are examples of cash value insurance.

Like universal life insurance, variable life is permanent insurance that lets you adjust your premium to account for changes in your income or expenses. The policy’s cash value is invested in underlying subaccounts and may increase or decrease based on the performance of those underlying investments. This flexibility – and variability – means you should routinely review your policy to avoid a policy lapse, especially when market conditions change.

Group life insurance is a life insurance policy you buy at a group rate, usually through your employer. If your employer doesn’t offer life insurance, you can buy your own individual life insurance policy.

At its core, a life insurance policy is a promise: to provide financial protection to your loved ones if you’re not there. The way a policy carries out that promise is defined by a few key features:

The death benefit: The amount of money the insurance company will pay when the insured person dies. Typically, this benefit is income-tax free.
The beneficiaries: The person or people who get the death benefit. It can all go to a single person (e.g., a surviving spouse), or it can be divided by percentage among a few people (e.g., a spouse could get 50%, and two adult children could each get 25%). And by the way, a beneficiary doesn’t have to be a blood relative or even a person – if you choose, you can leave all or part of your death benefit to an entity, such as a charitable cause.

The policy length or term: The time period that the insurer agrees to pay a death benefit. In a term policy, it’s defined as a specific number of years, such as 10, 20, or 30. A permanent policy lasts for the life of the insured, for whole life as long as premiums are paid, and for universal life as long as the policy is funded properly to pay monthly expenses.

The premium: The monthly or yearly payments needed to keep the policy in effect.

The cash value: The policy’s investment component that builds over time and can be cashed out or borrowed against.1, 2 A term policy has no cash value.
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The policy length: A whole life policy lasts your entire life, while a term policy only provides coverage for a limited number of years. Once the term expires, your beneficiaries are no longer entitled to a death benefit.

The cash value: A term policy has no value once it expires. A whole life policy is a life-long asset that can be accessed to help meet financial goals up to and after retirement.

The premium: For a given death benefit – e.g., $100,000 – premiums will be higher for whole life, along with the certainty that your beneficiaries will eventually be paid a death benefit. read more »read less »

No matter what kind of policy you get, make sure to get it from an experienced insurer that’s financially strong. After all, one of the main benefits of having life insurance is that it helps provide a level of certainty in a world that is anything but. Financial strength ratings are an objective way to gain assurance that the company will be there for your family, many years down the road