If the idea of expecting your children to support you when you’re older gives you the heebie-jeebies, you should be aware of the insurance options that can guarantee a smooth and stable old age period.
The developed world have nursing homes that costs about $80,300 annually while here in Africa and especially Kenya such facilities are restricted to the wealthy. Due to this fact long-term insurance is the best bet. After retirement at about 60 such an insurance policy can be converted into an annuity policy where you can receive monthly payment about 60 – 70% of your previous monthly earnings. this will guarantee minimal change in lifestyle and hence a better predictable old age.
However, you have other options when it comes to financing long-term care. Many people are now using features of their life insurance policies — or buying new, hybrid policies — to help with costs. Here are some ways to pay for long-term care.
Accelerated death benefits
Accelerated death benefits are included as part of many life insurance policies, though some people may have to add them through a rider. They give policyholders the ability to draw a percentage of their death benefit while they’re still alive to fund medical expenses, including long-term care.
These riders are a good option for younger adults who want a head start on planning for long-term.
If you know you’ll want accelerated death benefits on your policy, shop around. There are huge differences between companies when it comes to benefit triggers. There are many life companies in Kenya and one needs to compare the benefits of their products before making any purchase decisions. While some companies require you to be diagnosed with a terminal illness before providing accelerated benefits, others require only a critical or chronic condition.
Although your benefits will vary depending on your insurance company and your original death benefit, the decision you make now will shape your future finances.
Life insurance settlements
Some people who buy permanent life insurance policies when they’re young find that they no longer need the coverage later in life. In fact, they may be paying hundreds of shillings a month for a policy their family do not need anymore, when they really need help with the cost of long-term care.
If you need cash more than a death benefit, consider a life insurance settlement, also called a viatical settlement. In this transaction, you sell your policy to a third party, who takes over paying your premiums. The buyer receives your death benefit when you die. Some policies can also be surrendered before maturity (Cancelled and part of benefit refunded).
Getting a life insurance settlement is typically more lucrative than cashing out your policy (surrendering) — sometimes about four times more (minus transaction fees and broker commissions) but the amount you’ll receive varies on the period you had saved and the conditions of the policy.
Adults age 65 and older with such policies are the best fit for settlements.
Still another option is a hybrid life insurance policy. These allow you to use benefits for long-term care and whatever you don’t use is passed on to your beneficiaries, like standard life insurance.
But there are no free rides when it comes to coverage. The extra benefits mean hybrid policies cost more than those that just provide life insurance.
Do you even need life insurance?
Using life insurance to pay for long-term care can be a wise move — that is, if you need life insurance in the first place. Otherwise, most employers in Kenya today provide a retirement plan where the benefits are more superior. Despite this fact, any investment in Life Insurance will help one manage their finances in the future as the policies mature.
You only buy long-term care insurance once in your life, and it really is important to compare your various options.