Let’s Talk About Long Term Care

THE PROBLEM DEFINED

The question for your client is not whether they will need long term care, but what’s it going to cost their family, physically, emotionally and financially and how are they going to plan for that?

If a person is worth between $300,000 and $3 Million, they have a need for LTC planning. There are 4 main options.

1. Traditional Long Term Care

Stand-alone LTC policy that pays for all types of care from home health to nursing home skilled care. 

Pros: Typically starts out as the most inexpensive option, is available for all types of care, typically offers couples discounts, and can be tax deductible.

Cons: Use it or lose it. Price may increase substantially over time, most premiums payments have to be paid annually for life, and if not used the client typically doesn’t get any other benefits out of the plan. Also requires full underwriting.

2. Fully Underwritten Life Insurance with LTC and Chronic Illness Riders

This is a linked benefit policy that allows for premium payments to cover both life insurance and long term care type needs.

Pros: There is a death benefit if the client never uses the LTC or CI rider. The plan can be funded with a single premium, short pay, or life pay. Premium payments never increase.

Cons: Typically cost more than a traditional plan because of the added life insurance component. It is not tax deductible and not every rider for every company works the same way. Client has to go through full underwriting.

3. Annuity products with LTC riders

This is an annuity policy that allows for the value of the contract to be spent down for long term care costs. If the policy is Pension Protection Act qualified, the entire value can be paid out tax free if used for LTC. There are some limited offerings for uninsurable clients.

Pros: Very little underwriting, some policies are automatic issue, the policy may have a rider that gives the clients up to 4Xs the value in benefits, joint options available.

Cons: Limitations on qualified money and not every person can qualify for all products.

4. Simplified Issue Life Insurance with LTC riders

This is a linked benefit policy that allows for premium payments to cover both life insurance and long term care needs.

Pros: For healthy people the client typically only has to do a phone interview to qualify, there is a death benefit if the client never uses the policy for long term care, usually offers a large bucket of money to pay for LTC costs, and can be funded with a single premium, short pay, or life pay. Premium payments never increase. Joint options, return of premium, and lifetime riders are all available options.

Cons: Initially costs more than a traditional plan at today’s pricing.