The Policy That Helps You While You're Alive

Almost 70 percent of people turning 65 will need long-term care, and Medicare will not cover most of it. Some life insurance can step in while you are still living. Part three of More Than a Death Benefit.

Read the full article: https://news.americanretirementadvisors.com/life-insurance-with-long-term-care-benefits/

American Retirement Advisors helps families in Arizona and Nevada navigate healthcare, retirement income, and inheritance planning. Want to reach out? Text us at (602) 281-3898, email support@americanretire.com, or visit https://americanretirementadvisors.com.

Transcript

SPEAKER_00 0:01

Welcome to the American Retirement Advisor, coming to you from One to Three Z Studios. Real stories, real strategies, and straight talk about healthcare, retirement income, and inheritance planning. I'm Ian Schaefer, joined with Eddie and Betty. Let's get into it.

SPEAKER_03 0:16

Welcome back to the American Retirement Advisor. I'm Betty, and I'm here with Eddie. And today we're picking up part three of a series we've really enjoyed talking through. More than a death benefit. This one's based on a piece by Ian Schaefer, and I'll be honest, it's my favorite part so far because it's about the thing nobody wants to bring up at dinner.

SPEAKER_07 0:38

It really is the heart of the whole series. The first two parts ask whether you even need life insurance, and how the cash value can work a little like your own bank. Today's the one where the death benefit quietly turns into something that helps you while you're still here.

SPEAKER_04 0:53

Say that again, because I think that's the part that surprises people. Help you while you're still here. We're so used to thinking of life insurance as a thing that only pays out after someone's gone.

SPEAKER_07 1:05

Right. The whole mental model is I pay in and someday my family collects. And what Ian Schaefer is getting at is that modern life insurance can flip that. The money can show up when you need help living, not just when you pass.

SPEAKER_04 1:18

Okay. But before we get to how that works, can we sit with the why for a second? Because the article opens with a number that honestly stopped me.

SPEAKER_07 1:27

It stopped me too. According to the federal government, someone turning 65 today has almost a 70% chance of needing some kind of long-term care at some point. That's not a fringe risk. That's most people.

SPEAKER_04 1:40

Almost seven out of ten. And when we say long-term care, let's be plain about what we mean. Because I think people picture a nursing home and stop there.

SPEAKER_07 1:49

Aaron Ross Powell, it's broader than that. The article describes it as the help with daily living that comes with age, illness, or a fall. So it could be help at home, it could be an aid coming in, it could be a facility. It's the day-to-day stuff, not just a medical crisis.

SPEAKER_04 2:04

Aaron Ross Powell And here's where I think a lot of folks get tripped up. They assume Medicare's got it. They've paid into it their whole working lives, surely this is what it's for.

SPEAKER_07 2:13

Aaron Ross Powell That's the big misunderstanding. And the article is really clear on it. Medicare covers only limited short-term skilled nursing care, and only after a qualifying hospital stay, it does not pay for the ongoing custodial long-term care that most people eventually need.

SPEAKER_04 2:29

Custodial, that word again. Break that down for me the way you would for a neighbor over the fence.

SPEAKER_07 2:34

Custodial care is the bathing, the dressing, the eating, the everyday help. It's not a nurse fixing a medical problem, it's somebody helping you get through your day with dignity. And that's exactly the part Medicare doesn't cover.

SPEAKER_04 2:48

And that gap is brutal because people don't find out until they're in it. The article calls it one of the largest unplanned expenses in retirement and one of the least talked about.

SPEAKER_07 2:59

Both of those things being true at once is what makes it dangerous. It's enormous, and it's the conversation everybody skips. So you've got the biggest risk paired with the least planning. That's a rough combination.

SPEAKER_04 3:12

So let's get to the hopeful part, because this series is called More Than a Death Benefit for a reason. The question the article asks is: can life insurance actually help pay for long-term care?

SPEAKER_07 3:23

And the answer Ian Schaeffer gives is yes. And he calls it one of the most useful things modern life insurance can do. A lot of permanent policies now include what's often called a living benefit.

SPEAKER_04 3:34

A living benefit? I love that name because it's the opposite of how we usually think about this.

SPEAKER_07 3:40

It's a long-term care or chronic illness provision built into the policy. And here's the key: it lets you tap into your own death benefit while you're still alive if you become unable to care for yourself. So instead of that money only arriving after you pass, it's available when you actually need help.

SPEAKER_04 3:58

So the same policy that protects my family at my death can protect me during my life.

SPEAKER_07 4:04

That's the whole idea in one sentence. That's why it's more than a death benefit. The money can go toward care at home, an aid, a facility, whatever the situation calls for.

SPEAKER_03 4:15

Okay, now I want to know how it actually kicks in, because I can already hear a listener thinking, well, who decides I need it? Can I just call up and say I'm having a hard week?

SPEAKER_07 4:25

No, and the article's good about this. The trigger is specific. Generally, you can access these benefits when a licensed professional certifies that you can no longer perform at least two of the six basic activities of daily living.

SPEAKER_04 4:39

Two of the six. What are the six? Or at least what are some of them?

SPEAKER_07 4:43

The article names some of them: bathing, dressing, eating, getting in and out of bed. Those are the kinds of everyday things. And the other trigger is a serious cognitive impairment, something like dementia.

SPEAKER_04 4:55

That's an important one to call out because cognitive decline is its own whole fear for people, separate from a physical fall.

SPEAKER_07 5:01

Aaron Ross Powell It is. So whether it's the body or the mind, once a professional certifies you've hit that bar, you can begin drawing on the policy's death benefit to pay for your care.

SPEAKER_04 5:12

Aaron Powell No, I want to be honest with people because there's a trade-off in there, isn't there? If I'm spending that death benefit on myself, that's many that isn't going to my kids later.

SPEAKER_07 5:20

Aaron Ross Powell That's exactly right. And the article doesn't dodge it. The money you use reduces what eventually passes to your heirs. But look at the alternative. The point is it's there for you in a moment when paying for care out of pocket could otherwise drain everything you spent a lifetime building.

SPEAKER_04 5:36

That's the part that gets me, because the thing that empties a family savings isn't usually the death, it's the years of care before it.

SPEAKER_07 5:44

That's the quiet truth of it. The care is what eats the estate. So having a pool of money already set aside for exactly that, that's protecting the inheritance too in a roundabout way.

SPEAKER_04 5:55

Let's talk taxes, because the article gets into that, and I know people's ears perk up. Is this money taxed when it comes to you?

SPEAKER_07 6:03

The tax treatment is favorable, and that's part of what makes it attractive. Benefits paid out for qualifying long-term care needs are generally received income tax-free, within limits the IRS sets each year.

SPEAKER_01 6:15

Generally. Within limits. You're choosing those words carefully, and I suspect on purpose.

SPEAKER_07 6:22

On purpose, because the article is careful here, and so should we be. That favorable treatment comes with conditions. It depends on the rider qualifying under the tax rules and on you meeting the certification requirements. So it's not automatic and it's not unlimited.

SPEAKER_04 6:38

And there's a state piece too, right? Because not everything works the same everywhere.

SPEAKER_07 6:43

That's a good catch. What we just described is the federal income tax picture. The article notes that state income tax treatment can vary. So honestly, the exact way it land for any one person situation, that's a question for one of our advisors. I wouldn't want anyone to take a general statement and assume it's their specific answer.

SPEAKER_04 7:03

I think that's the right instinct. The big idea is there's a tax advantage source of money ready for a real and common need. The fine print is what you sit down and check.

SPEAKER_07 7:13

Exactly. The headline is genuinely good. The footnotes are real. Both things are true.

SPEAKER_04 7:19

Now, here's the part I really wanted to get to because you and I have both heard this complaint from people for years. Traditional long-term care insurance, the use it or lose it problem.

SPEAKER_07 7:30

Oh, this is the honest knock on the old standalone policies, and the article names it head on. You might pay premiums for decades, and if you were lucky enough to never need care, you got nothing back.

SPEAKER_04 7:43

And people hated that. I mean, really hated it. It feels like betting against yourself. Like, I'm paying all this money, and the good outcome is that I wasted it.

SPEAKER_07 7:52

That feeling is exactly why so many people refuse to buy it. And a life insurance policy with a living benefit answers that objection directly. If you need care, the policy helps pay for it. If you never need care, the death benefit still goes to your family.

SPEAKER_01 8:08

So either way, the money does something.

SPEAKER_07 8:11

Either way, nothing's wasted. And the article makes the point that that single difference is why people who would never touch a standalone policy are comfortable getting the protection this way instead.

SPEAKER_04 8:23

It takes the sting out of the decision. You're not gambling, you're covered on both ends. Okay, but I don't want us to oversell this, and neither does the article. There are real limits.

SPEAKER_07 8:32

There are, and I'm glad the piece includes them because a fair article has to. First one, a living benefit is not the same as comprehensive, unlimited long-term care coverage. Meaning there's a ceiling. There's a ceiling. The total you can draw is capped at your death benefit. So a modest policy gives you modest help, not a blank check. If you've got a small policy, that's a small cushion, not an endless one.

SPEAKER_04 8:58

And we already touched the second one. Every dollar you use for care is a dollar less for your heirs.

SPEAKER_07 9:04

Right. That trade-off is real and you've got to weigh it honestly. And then there's a third one that I think is the most important for people to hear. Not all of these riders are equal.

SPEAKER_05 9:14

Say more about that, because I think people hear living benefit and assume they're all the same thing.

SPEAKER_07 9:20

And they're not. The article draws a line. Some are robust long-term care riders, others are lighter chronic illness provisions that pay differently. And that difference matters a great deal when you actually need it, which is the worst possible time to discover your rider was the lighter kind.

SPEAKER_02 9:39

Ooh, that's the one that would scare me. You think you're protected, and then the way it actually pays isn't what you pictured.

SPEAKER_07 9:46

Which is exactly why this isn't a thing to buy off a shelf. The article's point is this is a tool you want chosen carefully, with someone who can tell you exactly what a given policy would and would not do for you. The specifics of how one writer pays versus another, that's a sit-down with the team conversation, not a guess.

SPEAKER_04 10:06

And there's one more limit, the medical piece. You can't wait until you need it.

SPEAKER_07 10:10

No. You have to qualify medically when you set the policy up. So, like a lot of things in life, the best time to handle this is before you think you need it, while you're healthy enough to put it in place.

SPEAKER_04 10:22

None of which, to be clear, makes it a bad tool.

SPEAKER_07 10:24

Not at all. The article's whole point is it's a good tool that you want chosen with care. Knowing the limits is what lets you use it well.

SPEAKER_04 10:32

So let's bring it home to people. Who should really be paying attention to this one?

SPEAKER_07 10:37

If long-term care is a worry for you, and given that 70% number, it reasonably should be, this is worth understanding whether or not you already own life insurance.

SPEAKER_06 10:46

That's a good way to put it. Even if you've got a policy, you may not know what's in it or what could be.

SPEAKER_07 10:52

Right, and for people who want their family protected and also want to plan for the very real possibility of needing care, a policy that does both jobs can be one of the most efficient pieces of a whole retirement plan.

SPEAKER_06 11:04

But it's not the only answer for everybody.

SPEAKER_07 11:06

It's not, and the article's honest about that too. For some folks, a different approach to long-term care fits better. The right answer depends on your health, your assets, and what you're trying to protect.

SPEAKER_06 11:16

Which is the kind of thing you map out, not guess at.

SPEAKER_07 11:19

Map out, not guess. Those are the article's own words, basically, and they're the right ones. This is too important to wing.

SPEAKER_04 11:26

Before we wrap, can we just make sure we're being precise about one thing? Because we've said permanent a few times. This living benefit, it lives on the permanent kind of policy, right? Not the temporary term kind?

SPEAKER_07 11:38

That's a fair distinction to draw. The living benefit the article describes is a feature of permanent coverage, the kind designed to last. Term insurance is a different animal. It's the temporary low-cost protection for the years your family depends on your income. The later life jobs, like care for yourself down the road, that's the permanent side of the house.

SPEAKER_04 11:58

I'm glad we said that out loud because they are not the same product, and people mix them up all the time.

SPEAKER_07 12:04

They really do. And which one fits depends entirely on what you're trying to accomplish, which is again the conversation to have with someone who knows your full picture.

SPEAKER_04 12:15

So let's leave folks with the big picture. What's the one thing you'd want a listener to carry away from Ian Schaefer's piece today?

SPEAKER_07 12:23

That long-term care is the risk most people leave out of their retirement plan, usually because it's unpleasant to think about, and because they assume something else like Medicare will cover it. And it mostly won't. But the good news is, the part I want people to hold on to. The good news is there are now flexible ways to prepare for it. A single well-chosen policy can protect both your family and yourself. The money does a job either way.

SPEAKER_04 12:52

That's the whole thing, isn't it? For so long, planning for care meant betting against yourself and hoping you lost. And now you can set something up where, no matter how your life unfolds, the people you love are taken care of.

SPEAKER_07 13:06

And so are you. That's why this is the part of the series that captures the whole point, more than a death benefit. It's right there in the name.

SPEAKER_04 13:15

So here's where I'll leave you. If a plan for long-term care is the missing piece for you, don't try to figure out which kind of policy, which kind of rider, which approach, all on your own. That's exactly what our team works through in a planning meeting, with the decades of insurance expertise our principal advisor brings.

SPEAKER_07 13:35

And these are the details where the wording really matters: the kind of rider, how it pays, how the tax treatment lands for your situation. That's a conversation, not a guess.

SPEAKER_04 13:46

You can reach our team at American Retirement Advisors at 602-281-3898. Bring your questions, even the unpleasant ones, especially the unpleasant ones.

SPEAKER_07 13:59

And next time in More Than a Death Benefit, we get into how life insurance can become a tax-free bucket that quietly reshapes your retirement income. That one's a good one, too.

SPEAKER_04 14:10

I'm looking forward to it. Thanks for spending this time with us. Take care of your family, take care of yourself, and we'll see you next time on the American Retirement Advisor.

SPEAKER_07 14:20

A quick note before we wrap up. Today's episode covers financial topics for educational purposes only. American Retirement Advisors does not provide tax or legal advice. Please consult a CPA or tax professional before making any decisions based on what you heard today.

SPEAKER_04 14:38

This is Betty with the American Retirement Advisor. Thanks for listening. If this episode helped you think differently about your retirement, share it with someone who needs to hear it. You can read the full article and browse hundreds more at AmericanRetire.com. Want to reach out? You can text us at 602-281-3898. Or email support at AmericanRetire.com. Be sure to subscribe so you never miss an episode. We publish daily. See you next time.

SPEAKER_00 15:12

Thanks, Eddie. Thanks, Betty. Until next time, this is Ian Schaefer coming to you from 123 Studios. I hope you've enjoyed this recording of the American Retirement Advisor, where we make healthcare, income, and inheritance planning 23 Easy.