In this step of the long-term care insurance conversation, you’re going to finally start offering solutions (mind you, this is step six out of seven! Don’t worry if you missed the previous steps—1-6 are on our blog, but we’ll be compiling and sending them all out in one neat package soon).
Let’s jump into types of solutions for your clients.
Tax-qualified long-term care insurance (aka TQLTC, Traditional LTC, or Standalone LTC) is tax-advantaged and perhaps the most effective LTC solution on a dollar-for-dollar basis. Regular annual premiums are paid to secure an exponentially larger amount of benefit to be used for long-term care supports and services. The benefit pool is typically purchased to include a guaranteed inflation rider to ensure that benefits are meaningful at the time of claim.
This solution is great for a couple in good health and within the age range of 55 and 70. They have retirement savings of $500,000+ and would like to protect a chunk of their hard-earned assets. They have no need for a life insurance product anymore but would like to have coverage for any potential need for long-term care services down the line. They do not want to spend down their assets to qualify for MediCal/Medicaid and end up in a nursing home.
Accelerated Death Benefits
Accelerated death benefits may be accessible on a life insurance policy which allows for earlier access to the death benefit (before death) in the event of a terminal illness. This is not considered a long-term care solution. However, some newer policies are using benefit eligibility criteria that may include chronic illness. It is very important to check the definitions in these types of policies because there is such a wide variety.
Linked-benefit long-term care insurance (aka Asset-Based Life/LTC, or Hybrid LTC) may be a solution for those clients who have the means to secure a single-premium solution usually in the six-figure range. One payment with a Linked Benefit plan can secure a strong long-term care policy in addition to a modest life insurance death benefit if the long-term care coverage is never needed. Return of premium is generally a feature as well. Life pay options are available, and when compared to traditional LTC, you will clearly see the additional cost to having guaranteed premiums and a return of premium less claims at death.
We talk a lot about tax-qualified long-term care insurance because, more often than not, it’s the most desirable tool for the job. However, not everyone’s financial plan is the same, and other options such as linked benefits may work better for your client. It’s about understanding the products and determining what’s best for your client(s). Feel free to contact us to discuss your client’s situation so we can help you decide the best way to protect their assets while you help them stay out of the nursing home!