Living Benefits vs. Long-Term Care Insurance: Which Makes More Sense?

Planning for potential health challenges later in life is something most people eventually consider. Two popular options that can provide financial relief during serious illness or aging are life insurance with living benefits and standalone long-term care insurance. While both are designed to support you during your lifetime, they work in different ways. If you’re trying to decide which option makes more sense, here’s a breakdown to help guide your decision.

What Are Living Benefits?

Living benefits are features in many modern life insurance policies that let you access a portion of your death benefit while you’re still alive. These benefits are typically triggered by:

• Critical illness (cancer, heart attack, stroke)
• Chronic illness (inability to perform daily activities like bathing or dressing)
• Terminal illness (life expectancy of 12-24 months or less)

Once triggered, the insurance company pays out part of the policy’s death benefit directly to you. The money can be used for anything—medical expenses, caregiving, lost income, or everyday bills.

What Is Long-Term Care Insurance?

Long-term care (LTC) insurance is a standalone policy that specifically covers the cost of extended care services. This includes in-home care, assisted living, adult day care, or nursing homes. LTC benefits are only paid when the insured can’t perform at least two activities of daily living or has cognitive impairment.

These policies usually reimburse you up to a daily or monthly limit for eligible care services. They’re intended to help manage the high costs of long-term assistance due to aging, injury, or illness.

Key Differences

1. Type of Coverage

• Living Benefits: Attached to a life insurance policy. Offers flexible use of funds during a qualifying health event.
• LTC Insurance: A separate policy focused entirely on care-related expenses. Offers reimbursement for approved care services.

2. Use of Funds

• Living Benefits: Funds are unrestricted—you can use the money however you want.
• LTC Insurance: Limited to approved care expenses. Requires documentation and verification.

3. Duration of Benefits

• Living Benefits: One-time access to a portion of your death benefit. Once used, it reduces what’s left for beneficiaries.
• LTC Insurance: Can pay ongoing monthly or daily benefits as long as coverage limits haven’t been exhausted.

4. Cost

• Living Benefits: Often included in life insurance policies at no extra cost, or available as affordable riders.
• LTC Insurance: Premiums can be high, especially as you age. Policies may become unaffordable or lapse if not maintained.

5. Qualification and Claims

• Living Benefits: Requires diagnosis of a qualifying illness. Typically easier to access and faster to receive.
• LTC Insurance: Requires proof of care need and may have elimination periods (waiting time before benefits begin).

Which One Makes More Sense?

Living Benefits May Be Better If:

• You want a policy that serves multiple purposes (life insurance + health support)
• You prefer more flexible use of funds
• You want something affordable that doesn’t require a separate application

Long-Term Care Insurance May Be Better If:

• You’re specifically concerned about covering high long-term care costs
• You expect to need ongoing care for an extended period
• You want to protect other assets from being used for long-term care

Some People Choose Both

Depending on your financial situation and health outlook, a combination of life insurance with living benefits and a smaller LTC policy may offer the best balance. This approach gives you immediate flexibility with long-term coverage.

Final Thought

Both living benefits and long-term care insurance can offer real value during some of life’s most difficult moments. The best option depends on how much flexibility, coverage, and cost you’re comfortable with. For many people, life insurance with living benefits offers a practical, affordable way to prepare for the unexpected—while still providing long-term peace of mind. Be sure to review your options with a licensed insurance agent who can tailor recommendations to your unique situation.