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Friday, October 28, 2011 11:08:27 AM

This may sound like a simple question, but what are the differences between long-term care insurance and life insurance? Do I need both types of insurance?

Let me start by saying that life insurance and long-term care insurance serve very different purposes. I believe, for peace of mind, that both are needed but you have choices.

Life insurance is a contract between the policyholder and the insurance company. The policyholder promises to pay an agreed-upon amount each year, either at certain intervals or in a lump sum. Upon the death of the policyholder, the benefits are paid to the beneficiaries designated by the policyholder. This allows the policyholder to cover his or her funeral expenses, as well as other costs that are incurred after someone has died.

Life insurance is more involved than what is stated here, but the bottom line is that it's a benefit that lets your family and heirs cover your death expenses.

Long-term care insurance can help cover the cost of long-term health care beyond a set period. If home care coverage is purchased, the policy will pay for a visiting or live-in aide, companion, housekeeper, therapist or nurse. Care may include help with day-to-day activities. Or a policy can cover assisted living, adult day care, respite care, hospice care, a nursing home or Alzheimer’s facilities. Long-term care insurance pays for health care needs generally not covered by personal health insurance, Medicare or Medicaid.

A long-term care insurance policy can be negotiated to cover your anticipated needs. You can work with a long-term care insurance agent, taking into account both your potential future needs and what you can afford to pay. The younger and healthier you are, the lower the cost will be. None of us has a crystal ball, but many people over age 65 are going to need some long-term health care. About 40 percent of people between ages 18 and 64 are receiving long-term care.

Most of us do not want to be a burden to our families. Knowing that you have adequate insurance lets you know that you are taking care of yourself, as well as those you care about.

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Our Insurance Expert

Laura Adams is a personal finance expert and award-winning author who is Senior Insurance Analyst for InsuranceQuotes.com. She represents Bankrate Insurance’s web properties in the media and works as an advocate to make sure consumers protect their financial futures by having the right kinds of insurance.

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