Welcome back to our Financial Literacy Month series where we’re exploring the financial impact of long-term care and the importance of helping clients plan for a care need. Last week, we discussed the harsh realities of long-term care and why clients should plan ahead. Now, let’s take a closer look at Long-Term Care Insurance—the ultimate pre-planning tool.
Did you miss last week’s post? Check it out here:
Long-Term Care: The Biggest Threat to Your Client’s Retirement Plan
Long-Term Care Insurance (LTCI) allows clients to set aside funds for a future long-term care need. LTCI policies are customizable, so clients can tailor their policies to fit their specific budget, financial goals, and projected care needs. However, Long-Term Care Insurance must be purchased when the individual is in good health before they require care. Therefore, LTCI is only viable in pre-planning situations.
The Financial Opportunity in LTCI
As the population continues to live longer, the likelihood of requiring professional care also grows, making LTCI an essential product for your business. Long-Term Care Insurance not only allows your clients to avoid placing the burden of care on their family members, but it also helps them protect their hard-earned assets from paying the long-term care bill.
LTCI is available for individuals in good health standing who are below age 86 for hybrid policies or below age 79 for traditional policies. Although health can be somewhat subjective, your client may be a good candidate for LTCI if they:
- Have never been prescribed a handicap sticker
- Do not require help with any Activities of Daily Living (ADLs)
- Have never been diagnosed with AIDS, HIV, or ARC disorders
- Have never been diagnosed with or presented symptoms of Alzheimer’s disease, dementia, memory loss, multiple sclerosis, muscular dystrophy, ALS (Lou Gehrig’s disease), or Parkinson’s disease
- Are capable of walking four blocks or climbing two flights of stairs
If you have a client who is interested in LTCI but is worried about being declined coverage, we offer complimentary anonymous pre-screening. We’ll let you know if they’re a good fit for LTCI, and they can proceed with confidence. We’ll also let you know if they’re likely to be declined, and we’ll help you explore other planning options. Contact us to learn more.
Traditional Long-Term Care Insurance
LTCI is available in two different policy options: Traditional and Hybrid. Traditional LTCI functions like a typical insurance policy where the owner pays regular premiums in exchange for future benefits. The policy has no cash value and can be structured to meet your client’s needs and financial situation. Traditional policies are also eligible for state partnership protection, allowing the policy owner to retain additional assets should they exhaust their LTCI benefits and seek Medicaid eligibility.
Who is Traditional LTCI Appropriate for?
Traditional LTCI is best for clients looking for a more affordable option and those who don’t have a large lump sum to invest. Since the policy has no cash value, it may also be used for a healthy community spouse whose partner is seeking Medicaid benefits.
Hybrid Long-Term Care Insurance
Hybrid LTCI, also known as a Linked Benefit or Asset-Based policy, consists of a life insurance or annuity contract with long-term care benefits attached. It is typically funded with a single premium and offers a guaranteed death benefit if the policy owner never requires care—counteracting the old “use it or lose it” mentality that often accompanied LTCI. Hybrid policies do have cash value and earn growth on a tax-deferred basis.
Who is Hybrid LTCI Appropriate for?
Since it requires an upfront investment, Hybrid LTCI is best for higher-net-worth clients who can afford the lump sum premium. With a guaranteed death benefit option, a Hybrid policy would also be appropriate for clients who are concerned about losing their investment.
If you’d like to learn more about adding LTCI to your business or helping your clients choose the right policy, schedule a Long-Term Care Insurance Consultation with one of our in-house advisors today!