Long Term Care Planning

Life Insurance vs Long-term Care Insurance

Life Insurance vs Long-term Care Insurance

In this article

— Last Updated May 27, 2022

Read Time
6 mins
Reviewed by
Eric Berkman

Guide Life Insurance vs Long-term Care Insurance

— Last Updated May 27, 2022

Stephanie Wilson

Director of Operations


Reviewed by

Eric Berkman

Many Americans benefit from having both life insurance and long-term care insurance. Life insurance is particularly vital for the insured person while their children are young, whereas long-term care insurance is often required later in life. What is the difference?

A life insurance policy pays a benefit to your dependents upon your passing. Financial assistance for nursing home stays and assisted living costs is available via long-term care insurance policies if you lose your ability to care for yourself.

This article discusses the differences between life and long-term care insurance, as well as the advantages of each. In addition, we provide answers to the most frequently asked questions.

How do life insurance policies work?

Life insurance provides financial security for your loved ones in the event of your untimely death. Term life insurance and permanent life insurance are two types of life insurance.

Term life insurance

With term life insurance, you’re covered for a certain period, and your premiums are locked in at a fixed rate for the duration of the policy’s term. The most common options for insurance duration are typically 10, 20, and 30 years.

Your beneficiaries can file a claim and get the death benefit sum tax-free if you pass away during the policy’s term. When a policy has guaranteed renewability, it means that coverage can be renewed for a certain number of additional years after the first term ends. However, the renewal fee will increase annually.

Permanent life insurance

Permanent life insurance protects the insured’s life. The premiums for permanent life insurance are significantly higher than for term life insurance since part of your premium is applied toward the policy’s cash value, you are paying an insurance policy and an investment fund.

There are various types of permanent life insurance policies, and the cash value will accumulate slowly over several years. There are various types of permanent life insurance policies, and the cash value will accumulate slowly over several years. The cash value will not be available immediately. You will receive a cash-value estimate with your insurance illustration.

Universal life insurance

When you purchase a universal life insurance policy, you need to know exactly what you’re getting, since there is quite a difference in the price and features.

Guaranteed universal life insurance typically has the lowest level of risk, while variable universal life insurance carries the highest level of risk due to the cash value’s link to stocks and bonds. On the other hand, it is possible to accumulate greater financial value with indexed universal life, variable universal life, and variable universal life than with guaranteed universal life.

Speak to a licensed insurance professional if you are considering purchasing a universal life insurance policy.

Whole life insurance

The cash value component of whole life insurance is fixed and rises at a guaranteed rate of return, and the death benefit is also fixed. The dividends from many types of whole life insurance plans can be used to lower premiums or added to the cash value.

Whole life insurance has a fixed cash value that increases at a guaranteed rate. You can lower your premiums or increase your cash value with dividends from whole life insurance plans.

Burial life insurance

In the event of your death, a burial insurance policy, also known as a funeral or final cost insurance, will pay for your last expenses, including your funeral and burial. Considering how expensive funerals may be, it’s wise to protect your loved ones from financial hardship by purchasing burial insurance coverage.

Survivorship life insurance

Survivorship life insurance, often called “second to die life insurance,” covers two individuals, typically a married couple, under a single policy. The policy’s death benefit is distributed to the beneficiaries after the deaths of both policyholders. In most cases, a trust or federal estate taxes are part of a comprehensive financial strategy that includes survivorship life insurance.

Why buy life insurance?

Life insurance could play a critical role that benefits your loved ones. The death benefit from a life insurance policy can be distributed to anybody you choose as the beneficiary.

A life insurance policy’s payouts can be put to use in a variety of ways, such as:

  • Meeting the costs associated with a funeral and burial.
  • Settling your estate’s outstanding debts.
  • Financially supporting one’s family.
  • Providing financial support for a child’s or grandchild’s higher education.
  • Creating a savings cushion to help support one’s partner in times of financial hardship.

The value of a life insurance policy can be increased by adding riders that provide additional benefits. Guaranteed insurability might let you raise your death benefit every so often, or it could let you use your death benefit early to pay for your last expenses.

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How do long-term care insurance policies work?

Individuals aged 65 and over, or those with a chronic ailment requiring round-the-clock care, can often apply for long-term care benefits that pay for all or a portion of their assisted living nursing home care or in-home long-term care expenses.

If you suffer from Alzheimer’s disease or another kind of cognitive impairment and are unable to do two of the six activities of daily living, or ADLs, on your own, then you may be qualified to receive benefits under a long-term care policy. 

Applying for long-term care insurance (LTC) involves answering questions about your health and lifestyle. The insurance company will request your medical records and conduct a phone or in-person interview with you.

The level of protection you get is entirely up to you. Daily and lifetime payout limits are commonplace with a long-term care insurance policy. Premium payments begin when your application is accepted and your insurance is issued.

When you need long-term care services and submit a claim, the insurance provider will evaluate your doctor’s medical records and could send a nurse to do a medical exam. The insurance company has to agree with your treatment strategy before they’ll cover your claim.

For the first 30, 60, or 90 days of treatment, policyholders often pay in full before receiving reimbursement from their insurer for their out-of-pocket expenses. The time during which this occurs is known as the elimination period.

Following your eligibility for benefits and, often, following the receipt of medical care for that duration, the insurance policy begins to pay out. Until you hit the policy’s lifetime maximum, most plans will pay for care up to a certain daily maximum.

When both partners in a marriage purchase insurance from the same company, the couple might choose shared care. With this arrangement, if one of you uses up your individual policy’s benefits, the other may start collecting from their share. 

Long-term care costs

Your monthly costs will be influenced by the following factors:

Your age and health conditions

Costs increase with age and the presence of preexisting  medical conditions when purchasing coverage.


Long-term care insurance premiums are often higher for women than for men due to their longer life expectancy and increased likelihood of filing claims.

Relationship status

The cost of insurance is reduced for married couples compared to singles.

Coverage Amount

More comprehensive plans cost more because they include features like increased benefit caps for both the day-to-day and the lifetime of the policyholder, CPI adjustments to offset inflation, a shorter elimination period, and fewer limitations on the types of care that are covered.

Why buy long-term care insurance?

Long-term care costs are not covered by traditional medical insurance. Even if you need professional nursing or adult day care services, Medicare will only pay for a brief stay in a nursing home or some restricted home health care. Custodial care, which involves monitoring and assistance with daily duties, is not covered.

Most states require that you pay out of pocket for long-term care if you don’t have insurance to cover it. Medicaid is a federal and state insurance program for low-income individuals and families, but it won’t pay until you’ve used up most of your other resources.

Frequently asked questions

Does Medicare cover long-term care?

If long-term care is the only treatment you need, Medicare does not pay for the cost of care also known as custodial care. The majority of care received by nursing home residents and assisted living facilities is custodial care, which is assistance with basic daily tasks.

What is the biggest drawback of long-term care insurance?

There are certain drawbacks to long-term care insurance, including the fact that you will be responsible for all premium payments even if you never use the policy. A premium increase may be possible in certain plans. You pay higher premiums at first or you risk losing your money.

Are long-term care premiums tax deductible?

When combined with other non-deductible medical expenses, including Medicare premiums, premiums for qualifying long-term care insurance plans may be tax deductible on your income taxes. To qualify, you must typically both itemize your deductions and have total costs that exceed your adjusted gross income.

Final Thoughts

If you’re not sure whether you need life insurance, long-term care insurance, or a combination of the two, an insurance agent can assist you with that decision. You can also rely on them to help you find the insurance coverage that fits your needs and your budget.

Stephanie Wilson


September 29, 2022

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Where are you in your Life Insurance planning?

Life insurance will help you protect those you love and count on you for providing financial support, in the event you pass away. We’ll help you find the right policy, with the best coverage and best rates.

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