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\n","featuredImage":{"id":"cG9zdDoyMTM3MjU=","databaseId":213725,"altText":"A financial advisor explaining a life insurance conversion privilege to a client","date":"2023-09-13T00:30:56","fileSize":60169,"mimeType":"image/jpeg","modified":"2023-09-13T00:31:16","sourceUrl":"https://smartasset.com/wp-content/uploads/sites/2/2023/09/real-estate-agent-talking-to-senior-woman-in-the-kitchen-at-home.jpg_s1024x1024wisk20c6Y2G7GjHLbapzxCpx9B3GPowLLQX-zjWwZzWGAfCq_I.jpg","__typename":"MediaItem"},"modified":{"datetime":"2023-9-14","readable":"September 14, 2023"},"multipleBylinesByRole":{"editedBy":{"id":"dXNlcjoxMDk=","databaseId":109,"userId":109,"avatar":{"url":"https://secure.gravatar.com/avatar/b3335c657329e1a536e4ed6e332eaafd?s=96&d=mm&r=g","size":96,"__typename":"Avatar"},"description":"Mike was a senior editor at SmartAsset. He graduated with a Master's in journalism from the University of Missouri-Columbia. 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A life insurance conversion privilege allows you to convert your policy from one kind to another. For individuals who hold a life insurance policy, it’s common for their coverage needs to change over time. For example, you may outlive a term life insurance policy and want a permanent one. With a conversion privilege, you can change your existing policy from one type to another without having to provide a new medical exam or other evidence of insurability. Here’s how it works. You may also want to talk to a financial advisor if you’re looking to make an estate plan or to see how your finances will be impacted.

","

What Are Life Insurance Types?

","

At its broadest level, life insurance is a contract that issues a payment if and when you die. It’s designed to help protect your loved ones and your estate so that there’s money left after you pass. For example, a parent may take out a life insurance policy to make sure their children are taken care of if they die. Or an individual may take out a policy to make sure any remaining debts are paid and their funeral expenses are covered.

","

However, the details of life insurance quickly get complicated. There are many different types of life insurance policies depending on any given person’s needs and the specific type you choose can radically change the nature of your coverage.

","

When it comes to payment structure, for example, whole life insurance works like traditional insurance in which your beneficiaries receive a fixed payout at your death. Universal policies, on the other hand, work a little more like a savings account, in which your beneficiaries receive an amount based on the premiums you have paid over the years.

","

In addition to payment structures, there’s contract length. Some policies are known as “term” life insurance. These cover you for a set number of years and then expire. Others are known as “permanent” life insurance. These cover you for your entire life and, as a result, are typically much more expensive.

","

You can also receive individual coverage, in which you buy life insurance for yourself, or group coverage, in which you receive life insurance as part of a cohort. Group life insurance is most common as a benefit through an employer.

","

Depending on your individual needs, including costs and scope of benefits, you can choose which type of policy works best for you. Given that this is a very complicated area (this article barely touches on the full scope of options available), it’s wise to do this with a financial advisor of some sort.

","

What Is a Conversion Privilege?

","

","

You can choose which type of policy works best for you at the time you buy the policy, but over time those needs might change. For example, you may get your insurance through a group but then want to continue that policy as an individual. Or you may have signed up for term life insurance, but then want that policy to continue throughout your life.

","

One option would be to let your policy lapse and sign up for a new one, but there can be many reasons not to do so. Among others, you might lose some of the policy’s accrued value or you might be less healthy and insurable now than when you first received coverage.

","

To address this issue, some life insurance policies include what is known as a “conversion privilege.” This is a clause in your life insurance contract that allows you to convert the policy from one type to another without needing to undergo a new medical exam, fill out a new application or otherwise prove your insurability.

","

Often the main benefit of a conversion privilege is that it allows you to maintain your policy relatively easily or at a time in life when you might otherwise not be able to get affordable coverage. Occasionally, a conversion privilege will also include premium guarantees, ensuring that you can convert the policy without changing your premiums. However, this is not always the case and in fact, a conversion privilege may specifically require changed or higher premiums for the new policy.

","

How Do You Convert Life Insurance?

","

The details of how you execute a life insurance conversion will differ based on each individual account. Typically, though, this involves filling out a series of forms provided by your insurer known as a “conversion application.”

","

It’s important to remember that just because you do not have to undergo a medical exam or other proof of insurability, that does not mean the conversion is automatic. In fact, it’s relatively common for a conversion privilege to have certain requirements. Among others, a conversion privilege often has a time requirement, meaning that you have a certain number of years after the policy begins to convert it. Other policies may set an age limit, only allowing you certain conversions by or before a certain age. This is generally known as a “conversion period,” meaning the window of time in which you can make a conversion.

","

The policy may also require you to state how much insurance you want to convert and will base your new premiums on that number. It is also common for the underlying policy to charge more to include a conversion privilege in the original contract.

","

Finally, conversion privileges will often differ in terms of what policy types you can select. It’s common for a life insurance policy to specify what type of policy you can convert it into, rather than leaving the issue open-ended. Make sure to review your policy carefully to ensure that the conversion privilege works for your needs.

","

Bottom Line

","

","

A life insurance conversion privilege is a clause in your life insurance policy that allows you to change it from one type to another without undergoing a medical exam or other proof of insurability. They can be very useful, but also very specific, so make sure you select a policy that meets your needs.

","

Life Insurance Tips

","

We weren’t kidding above, there really is an enormous range of life insurance options out there. If you’re considering a policy, it’s important to learn about the many different types of life insurance you can select.

","

A financial advisor can help you build a comprehensive retirement plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

","

Photo credit: ©iStock.com/FG Trade Latin, ©iStock.com/Dean Mitchell, ©iStock.com/PeopleImages

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\n","featuredImage":{"id":"cG9zdDoxODI4ODY=","databaseId":182886,"altText":"Inscription: long-term care insurance","date":"2023-01-12T02:00:38","fileSize":37880,"mimeType":"image/jpeg","modified":"2023-01-12T02:00:38","sourceUrl":"https://smartasset.com/wp-content/uploads/sites/2/2023/01/longterm-care-insurance-inscription-with-the-view-of-stethoscope-and-picture-id1063745376.jpg","__typename":"MediaItem"},"modified":{"datetime":"2023-1-12","readable":"January 12, 2023"},"multipleBylinesByRole":{"editedBy":null,"reviewedBy":null,"writtenBy":null,"factCheckedBy":null,"secondEditor":null,"hideAuthor":null,"__typename":"Post_Multiplebylinesbyrole"},"adTargetingOverrides":{"fieldGroupName":"adTargetingOverrides","pageGroupNewKey":null,"__typename":"Post_Adtargetingoverrides"},"seo":{"canonical":"https://smartasset.com/insurance/do-i-need-long-term-care-insurance","metaDesc":"Do I need long-term care insurance? To help you decide, you need to understand what long-term care covers and how much it costs.","metaKeywords":"","metaRobotsNofollow":"follow","metaRobotsNoindex":"index","readingTime":8,"title":"Do I Need Long-Term Care Insurance? - SmartAsset","__typename":"PostTypeSEO"},"slug":"do-i-need-long-term-care-insurance","status":"publish","title":"Do I Need Long-Term Care Insurance?","uri":"/insurance/do-i-need-long-term-care-insurance","tags":{"nodes":[],"__typename":"PostToTagConnection"},"__typename":"Post","adPageGroupOverride":null,"bylines":{"writtenBy":{"id":"dXNlcjo5OQ==","databaseId":99,"userId":99,"avatar":"$49","description":"Ashley Kilroy is an experienced financial writer currently serving as an investment and insurance expert at SmartAsset. In addition to being a contributing writer at SmartAsset, she writes for solo entrepreneurs as well as for Fortune 500 companies. Ashley is a finance graduate of the University of Cincinnati. When she isn’t helping people understand their finances, you may find Ashley cage diving with great whites or on safari in South Africa.","additionalMeta":"$4a","email":null,"firstName":"Ashley","fullName":"Ashley Kilroy","lastName":"Kilroy","name":"Ashley Kilroy","postCount":"$4b","slug":"ashley-kilroy","__typename":"User"},"editedBy":null,"reviewedBy":null,"factCheckedBy":null,"secondEditor":null},"category":{"id":"dGVybToxOTUzMg==","children":"$4e","databaseId":19532,"categoryId":19532,"link":"https://smartasset.com/long-term-care-insurance/articles","name":"Long-Term Care Insurance","postCount":28,"slug":"long-term-care-insurance","ancestors":"$50","parent":"$53","__typename":"Category"},"isModifiedBeforePublished":false,"contentBlocks":["

A 65-year-old person today has nearly a 70% chance of requiring long-term care services at some point, according to the Administration for Community Living (ACL) and the Administration on Aging (AOA). Of that group, 20% will need it for over five years. So, chances are, you may also need this type of service down the line. But how will you pay for it? A long-term care insurance policy is one method to help lessen the bite of care costs. Here’s how.

","

Consider working with a financial advisor as you prepare for the possibility that you will need to be able to pay for long-term care.

","

What Is Long-Term Care Insurance?

","

To put it briefly, long-term care insurance helps cover the costs of long-term care services, such as in an assisted living facility. Other places where a long-term care policy will reimburse you include an adult day care center, a nursing home and your own home.

","

Generally, eligibility starts when you can no longer perform, independently, two of the six activities of daily living (ADL): mobility, which may include being able to transfer between a wheelchair and bed; bathing or showering; using the lavatory; maintain bladder and bowel control; dressing; and eating. Then you can take advantage of a wide range of aid.

","

Typical health insurance doesn’t cover these types of costs. And both Medicare and Medicaid have limitations, making them unreliable for the average person’s long-term care.

","

Even long-term care insurance policies require you to pay for services out of pocket up to a certain amount of time. Afterward, the insurer begins to reimburse you. Policies may pay up to a daily limit, with a maximum lifetime limit as the cap. However, couples may get around that by using a shared care option. With this, you can pool benefits.

","

The rate you pay for the policy will depend on multiple factors, including your age, marital status, gender, health, coverage level and insurer.

","

What Does Long-Term Care Insurance Cover?

","

What type of long-term care long-term insurance covers depends on the policy you buy.

","

However, these policies are comprehensive and will cover the expenses that Medicare doesn’t. Costs that it pays for include:

","

In-home care
Care coordination
Assisted living facilities
Nursing home care
Adult day care services
Home modification

","

They may also include paying for assistance with ADLs, like bathing.

","

Additionally, it may cover stays in hospice care or respite care. Hospice care is generally short-term and provides emotional and physical support for the terminally ill and their families. In contrast, respite care or temporary care, gives primary caregivers a break by offering care through other facilities or professionals. While these two services address two different needs, policyholders can receive help paying for either.

","

Keep in mind, though, long-term care coverage doesn’t pay for everything. It’s designed for custodial care, not medical care costs. Certain factors may also affect your eligibility, such as a pre-existing medical condition, such as dementia or Parkinson’s disease.

","

It’s up to you to decide how much coverage you need and how much you can afford. It’s crucial that you purchase within your budget. But you still want a sufficient amount of benefits to support you while you age.

","

Reasons to Get Long-Term Care Coverage

","

Consider the variety of insurance policies you already own. From homeowners to auto to life, you probably have multiple reasons why you purchased them. Likewise, there are several reasons that people see the value in long-term care coverage. Here are some ways it might impact your life for the better.

","

Preserves your assets

","

While you can get an estimate, it’s hard to pinpoint the exact price you’ll pay for long-term care. While you can find estimates, such as through the Genworth Cost of Care Survey tool, the guesswork makes it difficult to save enough.

","

In addition, relying on Medicare or Medicaid could leave you at a financial loss. Medicare won’t help with the costs of permanent and ongoing care. Likewise, Medicaid has its limitations, namely its income guidelines and the level of care needed to qualify.

","

An insurance policy ensures you don’t have to drain all your savings to be eligible for financial help. And, it takes the financial burden off of your family by safeguarding some of those remaining retirement assets.

","

Creates care options

","

","

We all have an ideal future as we age. Purchasing a long-term care insurance policy ensures you have a safety net installed into your financial plan. It can be incredibly costly to pay for long-term care out of pocket. And while Medicaid can help pay for specific costs, such as nursing home care, when you’re out of savings, it won’t pay for everything. For example, it doesn’t always cover assisted living options or home-based care.

","

Long-term care insurance ensures you can pay for the type of care you want and need when the time comes. You can use it to supplement the savings you already have.

","

Protects your family

","

Naturally, most of us would like to stay in our own homes throughout our senior years. But with the likelihood of needing long-term care, that can put a strain on our loved ones. As a result, family members, partners and friends often take on the caregiver role, which can be difficult. According to the American Association of Retired Persons’ (AARP) data, one in three caregivers provides care completely alone. Many of which go unpaid despite caring for recipients with complex support and medical needs.

","

If you’re considering long-term care insurance, think about the future you see for yourself and your potential caregiver. What does the impact look like on their life? There will be financial and emotional burdens in addition to the work.

","

By purchasing a policy, you ensure there are some finances to pay for outside help. That takes a weight off of your shoulders and and those of your loved ones as well.

","

How to Buy Long-Term Care Coverage

","

The options available to you may vary. Some employers offer their employees the opportunity to buy a long-term care policy through their workplace. Occasionally, this comes at a discounted group rate from their broker. While you may have to answer a few questions about your health to qualify, it may be easier or less expensive than purchasing a policy on your own.

","

Otherwise, you can buy coverage directly through an agent or insurance company.

","

If you’re shopping for a policy, remember to get several quotes from varying companies. That way, you can compare your pricing options. Comparison shopping is important, regardless of whether you purchase independently or through work. The discount that may come with an employer’s plan may be nice, but it’s still possible to find competitive rates.

","

It’s also advisable to work with an independent long-term care insurance agent who can sell products from various carriers. From there, it’s a matter of finding a policy to fit your needs.

","

Do I Need Long-Term Care Coverage?

","

Every person’s situation is different. If you have very little funds during your senior years, you may qualify for Medicaid. This option may offer fewer choices, but it does provide funding for low-income individuals. On the other hand, if you have more than enough savings, it might be better to pay out of pocket instead.

","

However, if you fall between the two ends of the financial spectrum, then long-term care insurance may be worth consideration. It protects your retirement savings from pricey and unexpected medical costs, ensures choice in care and offers you and your family peace of mind.

","

Additionally, think about the lifestyle you live. For example, if you have no one you can rely on as a caregiver then you likely need the option of a facility. Or, if you’re a woman, you’ll likely live longer and need longer care as a result. On average, women need 3.7 years of care, whereas men only need 2.2, according to the ACL.

","

The Bottom Line

","$55","

Long-Term Care Planning Tips

","$56","

Photo credit: ©iStock.com/syahrir maulana , ©iStock.com/vgajic, ©iStock.com/Instants

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\n","featuredImage":{"id":"cG9zdDoxNjg1ODg=","databaseId":168588,"altText":"SmartAsset: Can Medicaid Take Life Insurance From a Beneficiary?","date":"2022-11-08T09:46:09","fileSize":44243,"mimeType":"image/jpeg","modified":"2022-11-08T09:46:09","sourceUrl":"https://smartasset.com/wp-content/uploads/sites/2/2022/08/iStock-1151287599-1.jpg","__typename":"MediaItem"},"modified":{"datetime":"2022-11-8","readable":"November 8, 2022"},"multipleBylinesByRole":{"editedBy":null,"reviewedBy":null,"writtenBy":null,"factCheckedBy":null,"secondEditor":null,"hideAuthor":null,"__typename":"Post_Multiplebylinesbyrole"},"adTargetingOverrides":{"fieldGroupName":"adTargetingOverrides","pageGroupNewKey":null,"__typename":"Post_Adtargetingoverrides"},"seo":{"canonical":"https://smartasset.com/insurance/can-medicaid-take-life-insurance-from-a-beneficiary","metaDesc":"While Medicaid can't take your life insurance policy when you're alive, it can take death benefit proceeds from your estate to recover costs.","metaKeywords":"","metaRobotsNofollow":"follow","metaRobotsNoindex":"index","readingTime":4,"title":"Can Medicaid Take Life Insurance From a Beneficiary? - SmartAsset","__typename":"PostTypeSEO"},"slug":"can-medicaid-take-life-insurance-from-a-beneficiary","status":"publish","title":"Can Medicaid Take Life Insurance From a Beneficiary?","uri":"/insurance/can-medicaid-take-life-insurance-from-a-beneficiary","tags":{"nodes":[],"__typename":"PostToTagConnection"},"__typename":"Post","adPageGroupOverride":null,"bylines":{"writtenBy":{"id":"dXNlcjoxMzM=","databaseId":133,"userId":133,"avatar":"$58","description":null,"additionalMeta":"$59","email":null,"firstName":"Sarah","fullName":"Sarah Sharkey","lastName":"Sharkey","name":"Sarah Sharkey","postCount":"$5a","slug":"sarah-sharkey","__typename":"User"},"editedBy":null,"reviewedBy":null,"factCheckedBy":null,"secondEditor":null},"category":{"id":"dGVybToxOTU0NQ==","children":"$5d","databaseId":19545,"categoryId":19545,"link":"https://smartasset.com/life-insurance-policies/articles","name":"Life Insurance","postCount":43,"slug":"life-insurance-policies","ancestors":"$5f","parent":"$62","__typename":"Category"},"isModifiedBeforePublished":false,"contentBlocks":["

Medicaid provides a way to pay for medical costs. But it can also lay claim to the assets that you leave behind, including life insurance if you do not have a designated beneficiary. Let’s break down what what Medicaid can claim and how to protect your assets. A financial advisor can help you create an estate plan that protects your assets for your family.

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What Is Medicaid?

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Medicaid is a government-sponsored health insurance program, it’s run by the federal government in conjunction with state governments. Importantly, the program is designed for Americans in need.

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Each state sets income limits for Medicaid eligibility. Although the exact qualifications vary, you likely qualify for Medicaid if your modified adjusted gross income (MAGI) is less than 100% to 200% of the federal poverty level. As of 2022, the federal poverty line sits at $18,310 for a two-person household.

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Medicaid Estate Recovery Program

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Medicaid coverage can assist with both short-term and long-term healthcare services. So, as you can imagine, the costs for the program can add up quickly.

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The Medicaid Estate Recovery Program works to recoup the costs of benefits. Although the details of the program vary by state, it means that Medicaid can pursue payment for benefits provided through the recipient’s estate.

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Ultimately, the results of the Medicaid Estate Recovery Program can lead to smaller inheritances for estate beneficiaries.

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Can Medicaid Take Life Insurance From Beneficiary?

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The Medicaid Estate Recovery Program can lay claim to a number of assets you leave behind. But, can Medicaid take life insurance from beneficiary? Generally, Medicaid cannot take a life insurance payout from a beneficiary. That’s because the life insurance company will send the funds of your death benefit directly to the beneficiary. However, it’s critical to name a beneficiary on your life insurance policy.

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If you don’t specify a beneficiary on your life insurance policy, the proceeds of the policy will go to your estate. Since Medicaid has the right to recoup its costs from your estate, a life insurance benefit that winds up in your estate could end up in the hands of Medicaid.

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How to Protect Your Financial Legacy

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If you use Medicaid funds, it’s possible the program will seek reimbursement from your estate after you pass away.

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The reality of extremely high medical costs can mean that the Medicaid Estate Recovery Program can take a big bite out of your financial legacy.

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The good news is that careful planning can protect your assets to pass on to beneficiaries. Here are three common options to consider when protecting your financial legacy from medical costs:

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Before moving forward with any of these strategies, discuss your options with a financial advisor. The right professional can help you craft an estate plan that takes your specific wishes and assets into account.

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Bottom Line

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The Medicaid Estate Recovery Program gives Medicaid the ability to lay claim on the assets you leave behind. If you designate a beneficiary on your life insurance policy, the funds should be distributed directly to your beneficiary. Without this clear designation, the funds will be considered fair game for Medicaid as a part of your estate.

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Financial Planning Tips

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A second-to-die policy is designed for couples who want to share a life insurance policy with specific beneficiaries, such as children and grandchildren. The life insurance company will only make a payout to the beneficiaries after the last survivor passes away. We’ll explore what a second-to-die insurance policy is and what to consider before jumping into this life insurance product.

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Keep in mind that it is often a good idea to discuss your unique situation with a financial advisor for help with decisions about your insurance options.

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What Is a Second-To-Die Insurance Policy?

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A second-to-die policy is sometimes called a survivorship universal life insurance policy. As the name suggests, the death benefit is only paid out to the beneficiaries after the second policyholder passes away.

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Married couples may be the most likely to pursue this policy. But it’s an option for any pair that shares a common financial interest. Other potential pairs for a second-to-die policy include those in a civil union, cohabitating, or business partners.

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In many cases, this type of policy is used by married couples to pass on wealth to their children. But other partners, including business partners, may choose to take advantage of this insurance option.

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The major difference between this policy and other options is that the surviving partner won’t receive any benefits when the first partner dies. Instead, the insurance company withholds the proceeds of the policy until the surviving partner dies.

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Second-to-die policies can include a cash value that accumulates over the term. As you age, the cash value grows to cover higher annual premiums. Over time, the cash value of your policy will grow tax-deferred.

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How Second-to-Die Policies Work

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In general, this type of insurance policy is designed to pay estate taxes or pass wealth to surviving heirs. Policyholders will make annual premium payments to cover the death benefit. After both policyholders pass away, the insurance company will issue a death benefit payment to the beneficiary of the policy.

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The goal of a second-to-die policy is to limit the tax burden of a surviving partner. Instead of paying federal estate taxes upon the first spouse’s death, the surviving spouse can avoid draining their reserves to cover estate tax bills.

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Second-to-die policies have some similarities to joint insurance policies, another type of shared life insurance between two people. Joint life insurance generally comes with a “first-to-die” provision. It gives a payout to the surviving partner after the first insured person dies. But some joint life insurance policies are written as second-to-die contracts.

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Benefits of a Second-To-Die Insurance Policy

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Here’s a look at the advantages of a second-to-die policy:

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More affordable. In most cases, premium payments for a second-to-die life insurance policy are significantly less than paying two separate premiums for the policyholders.
Easier to qualify. With traditional life insurance policies, poor health can make it challenging to lock in a policy. Since there are two policyholders, it’s possible to get a policy even if one partner is in bad health.
Estate planning tool. A life insurance policy is a useful estate planning tool. Not only can it help with tax planning, but it will also issue a death benefit to your beneficiaries.
Customizable. When choosing a policy, you can work with an insurance company that offers customizations for your unique situation.

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Drawbacks of a Second-To-Die Insurance Policy

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There are also some potential disadvantages to consider:

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Sticky situation if partners split. A divorce can result in awkward negotiations over how the policy gets handled.
No benefits for surviving partner. In situations where policy holders have removed one or more persons as beneficiaries but continued to pay premiums on the policy, the partner who survives won’t receive any death benefit.
The final payout can be decades later. If one partner lives significantly longer than the other, the beneficiaries will be waiting around a long time before receiving a death benefit.

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When Is a Second-To-Die Policy a Good Idea?

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A second-to-die policy isn’t the right life insurance policy for every situation. But in some cases, it makes the most sense. Typically, wealthy families purchase this policy with the goal of passing funds to their heirs. It’s not a good idea if either surviving partner would struggle to make ends meet after the death of the other. If either spouse would need a death benefit to meet financial obligations, then it’s smart to opt for policies that prioritize the fiscal well-being of both partners.

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The Bottom Line

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Life insurance is a helpful tool to protect the interests of your heirs. If your spouse won’t need a death benefit to make ends meet, then a second-to-die life insurance policy is a relatively affordable way to provide for other beneficiaries.

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Life Insurance Tips

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