Q: Should I Consider A Combined Life And Long Term Care Plan?
The combination of a life and long term care insurance plan is sometimes referred to as a hybrid policy. These are based on buying a cash value life insurance plan and a rider that allows the cash value of the policy to be used for Long Term Care expenses. Conceptually, and from a sales perspective, these hybrid plans seem to make sense. Looking more closely, however, there are serious flaws. First and foremost: the life insurance plan that these additional coverages are coupled with are cash value type policies such as Whole or Universal Life. Dave is adamantly against these types of plans and coupling them with a Long Term Care Insurance benefit does not increase their appeal. In most cases the added benefits are inferior to plans you can purchase directly and not worth the risk. Many of the LTC benefits in a hybrid plan are limited to either the amount of benefit paid, the types of services covered, or the length of benefit period.
Dave Ramsey recommends life insurance while you have debt that your estate cannot pay if you were to die prematurely and/or you have dependents who rely on you for their financial lifestyle. As you eliminate debt and grow savings you reduce your need for life insurance and see an increased need for LTC. This is because you want to protect those assets to maintain the financial lifestyle of both plans and incur expenses for both coverages to keep the one that may end up being more important.
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