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Life Insurance Or Long-term Care: Make The Right Pick

In some instances you should hang on to life insurance. For example, heirs might be forced to sell the family business or part of your estate to pay taxes if they don't receive life insurance proceeds. Read more about whole life insurance.

Combining life and long-term care insurance

If you need both life and long-term care insurance, you can buy separate policies or invest in one product that combines benefits.

A life insurance policy with a long-term care rider is one way to go, says Steve Casto, founder and president of Strategic Wealth Solutions Inc. in Omaha, Neb. That option is becoming more attractive as insurers reduce benefits, increase premiums and tighten up underwriting for traditional, standalone long-term care insurance policies, Casto says. Many insurers have gotten out of the long-term care insurance business and long-term care insurance options are dwindling.

MassMutual is rolling out such a rider on one of its whole life products. The rider lets you access up to 90 percent of the death benefit for long-term care. Any portion of that amount you don't use is paid to your beneficiary when you die. If you don't need any long-term care, your beneficiary receives the full death benefit.

"We're seeing a lot of interest," Bates says. "It's not necessarily a replacement for traditional long-term care insurance, but it's a great alternative."

MassMutual will continue selling standalone long-term care policies, Bates adds.

Another option is asset-based life insurance policies -- also called combination or linked policies -- which combine life insurance and long-term care coverage. These policies, such as Pacific Life's Pacific PremierCare or Lincoln Financial Group's Lincoln MoneyGuard Reserve, feature a one-time, lump sum premium, typically around $100,000 or more. They provide long-term care benefits if you need them, or they pay a death benefit to your beneficiary. If you decide you don't want the policy after all, you can get back the money you paid in premiums.

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