Longevity Insurance benefits: Why you should consider it?

Insurance often makes plenty of sense from a financial perspective. But when it comes to longevity insurance, it’s not always clear how or why this kind of insurance is advantageous, what type might be best for you, and where you should get the right policy.

The following post will answer many of your questions and point you in the right direction on how to approach longevity insurance.

What is longevity insurance?

Longevity insurance covers long-term care costs that exceed traditional medical expenses. The design of this is to help pay for care such as assisted living, in-home care, or nursing home costs.

Longevity insurance policies are usually sold as a way to potentially protect your assets and financial future.

Unlike traditional life insurance policies, longevity insurance typically cannot be used to pay your final expenses if you die. There are some exceptions, though. Some policies may allow your beneficiaries to use part of the cash value to cover funeral and final medical expenses if you pass away while the policy is in force. When reviewing a policy’s details, make sure it covers this possibility for you.

If a policy allows your beneficiaries to use any of the cash value to pay your final expenses, it’s important to keep in mind that you may not be able to make a claim on it to offset those expenses.

How does it work? Well, you pay a premium for a term of coverage (usually 10 years), and your policy will build up cash value that provides benefits once you’ve reached the retirement age (typically 65). These benefits are paid as a lump sum or with regular payments. The amount varies based on your age, policy and other factors.

What makes longevity insurance different?

In addition to covering long-term care costs, longevity insurance is different from traditional life insurance in several ways:

Some policies have a health restoration rider that lets you add cash value or benefits (usually for premiums) if you improve significantly. This could be particularly helpful for someone nearing retirement with limited savings and who has had poor health over their lifetime. However, these riders are typically costly and may have other restrictions.

The benefits are usually paid in a lump sum. So you can use the money however you like instead of getting a regular stream of payments.

Also, most policies have an elimination period (also called a waiting period, probationary period or vesting period). This is the amount of time that must pass before you can receive benefits under the policy. You can typically use this time to better understand your options and purchase long-term care insurance if needed.

Your premiums generally remain level throughout this time. As long as you maintain coverage, your policy will continue to build cash value.

There are some exceptions to the elimination period. More flexible policies allow you to begin receiving benefits immediately in the case of a serious illness or injury, terminal illness or accident. These are also more expensive.


Some policies have a guaranteed issue/guaranteed conversion option. It allows you to purchase coverage if you qualify based on your medical condition; even if the insurance company considers it a high-risk. With this option, there’s no waiting period and you can receive benefits immediately after your coverage begins. This may be useful for someone who has been declined coverage in the past due to their health history or is concerned about being declined in the future due to advancing age or pre-existing conditions (for example, cancer).

Why should I consider longevity insurance?

long term planning

We all should plan for the future, and that fact is undeniable. One way to do that is by considering potential long-term expenses and how you’ll pay for them.

A long-lasting marriage or relationship could help you get through these challenges, but it may not always happen that way. If your spouse or partner has serious health issues, they may end up needing help taking care of themselves and managing their finances. You may need to take on additional responsibility over time. It could mean changing your career or lifestyle to help provide the care they require.

Long-term care services can be expensive, often costing a few thousand dollars a month (or more) for in-home care and assisted living facilities. Without the proper coverage, you might have pressure to choose between paying for care out of pocket or withdrawing from your savings and other assets. The latter could have a major impact on your quality of life in the future.

Before deciding whether longevity insurance makes sense for you, it’s important to consider how much long-term care could cost you. The vast majority of people living to age 65 will need some type of long-term care. The average cost for a nursing home can vary but is typically around $70,000.

Depending on your needs, you’ll need to figure out how much coverage you need to protect your assets and the income you’ll have available afterward.

How much can longevity insurance be worth?

The cash value in a policy could be worth much more than the original premiums you paid. How much it’s worth depends on the type of policy you get, when you purchase it, how long you keep coverage, etc.

Typically, your longevity insurance benefits are based on some factors:

If your policy doesn’t offer guaranteed protection for medical inflation (which is the case for some policies), your annual benefit increase from policy year to policy year typically isn’t tied to medical inflation. This means that the amount of coverage may not increase with rising health care costs and may even shrink over time as a result. Sometimes we call this a declining benefit design or “non-participating.

It’s also important to consider how your benefits are paid out. Lump-sum payments offer you more flexibility but may not cover the exact need you have. For example, if you need care for a long time, you might run through the money before your needs end. On the other hand, if your needs are short-term and easily managed at home, you might have a lot of money left on your hands when it’s all over.


With regular payments, you typically get a small amount every month for a set period of time (often 20 years), which can be helpful for covering ongoing costs like medical expenses. You can spend the money any way you like.

There are many nuances to consider when deciding whether longevity insurance is right for you. Be sure to compare best long-term care insurance companies in 2022, as well as policies that include medical inflation protection, if applicable, to make an informed decision that protects your assets and provides the coverage you need.

Which seniors should buy longevity insurance?

Longevity insurance is geared toward people who want to protect their assets in case they need long-term care services later in life. You can purchase coverage while you’re younger and still have time to take advantage of it if you need it or want the peace of mind knowing it’s there if needed.

If you’re single, have a spouse with significant health problems, have experienced a medical condition that might make it difficult to qualify for coverage later (such as cancer), or generally want more financial protection in case of a long-term care event, it makes sense to consider longevity insurance.

It’s also helpful if you’d like to keep your options open regarding the care you receive and your living situation. For example, if you live independently now but may need some help in the future or if you may want to move into an assisted living facility or nursing home as your needs change.

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Now finally: should I buy longevity insurance?

If you’re still unsure about whether a longevity insurance policy is right for you, consider the following situation: You’re in your 60s and have good health. You haven’t been in a serious car accident or had any major medical problems in the past. You’re financially comfortable, and you may have a significant amount of savings through your 401(k) and/or IRA. You work as much as you want and start to plan for retirement. Then, what happens?

In this situation you have more options than if you’re just a typical 65-year-old. You could choose to remain independent and pay the increasing costs of care out of pocket. If that’s not possible, try to make the best decision for yourself based on the information you have now. While it’s difficult to predict whether a serious medical condition or life event might change that choice in the future, remember there are plenty of financial benefits available today with longevity insurance outside of just retirement planning.


Consider what type of coverage would work best for your financial situation, health and lifestyle. Longevity insurance could provide the care you need without putting your savings at risk, which can be a major benefit to many seniors.