Beneficial rider could prove invaluable

Farm Forum

In the last column, I wrapped up our examination of the basic designs and benefits of the major forms of life insurance. Now we can begin a discussion on a beneficial rider we can add to certain policies. I have alluded to one that could prove to be invaluable for you and your family. As you will see, this rider just makes good sense when implemented as part of an overall risk management strategy.

As life insurance lends one strong leg of stability, long term care insurance certainly provides the other sturdy leg that serves to balance a practical estate plan. Until recently, the only viable solution to minimize this quite possibly detrimental expense was to obtain a policy dedicated solely for this purpose. Doing so has served many families quite well for years and has provided the needed guarantees and associated peace of mind. As of late, there are a couple of growing drawbacks to a traditional style long term care policy. The first being the cost of the policy itself, and the second is the difficulty in getting through underwriting and even being accepted for a policy. Both have roots in the same base cause. Folks are using these policies far more than the insurance companies had originally estimated and accounted for actuarially. Therefore, they have had to increase the premiums accordingly and are becoming much more selective in who they ultimately choose to cover.

These policies are also a use it or lose it proposition in that if you don’t need the benefits (a very good thing indeed) no one will realize anything from the investment you have made in the form of premiums. A few select companies are now offering plans where we can package long term care coverage right into a life insurance policy. This helps a lot of folks to get the coverage they so desperately need. The key factor here is that the underwriting is based more on mortality than morbidity. So, you can have some physical ailments that would preclude you from obtaining traditional long term care insurance but will have little if no effect on life insurance. Bottom line is that the insurance company is contractually obligated to pay the entire proceeds at some point. The premium paid for this incredibly important rider simply allows them to do so earlier should you need care.

Should you want to find a combination plan that is right for you, it is imperative to have enough benefit selected to cover any estate planning needs and long term costs so as to not jeopardize either in the event of a claim. It is also of utmost importance to select a strong reputable company, the appropriate plan, and the proper amount of benefits based on a complete evaluation of your family’s needs. As always, a knowledgeable advisor can be instrumental in helping you by recommending and more importantly, implementing the best solution based on your unique situation. As with all things, some plans and advisors are much better than others. With both, avoiding the hype and glitz and sticking with strength and stability will serve you better in the long run.

The real beauty in taking this approach lies in the fact that if you never need the long term care portion of your policy-or only need some of it, your beneficiaries will receive either the entire face amount or the remaining portion of it as proceeds respectively. Additionally, each and every dollar of these proceeds no matter how paid out are 100 percent tax free. This just makes the case for these plans even more attractive and well worth looking into.

Dennis Foster has been helping Families with Financial and Estate Planning needs for 25 years. He welcomes comments and questions and can be reached at 605-887-7069 or