People are living longer. The old saying, “that which used to kill us now only debilitates us” rings more true with each passing year. With the advancements of surgeries, medicines, technology, and scientific knowledge, extended care planning should be a basic part of every financial plan. With over 75% of people qualifying for LTC benefits at some point in their life, it would essentially be irresponsible to not plan in a potential LTC event within a client’s retirement plan.
AdvisorServe is well positioned to provide you as an advisor with all the resources and education you need to tackle the question of LTC planning with your clients. We can run a cost analysis of current LTC costs in your client’s cities, and then help project out the anticipated cost of care in the future. With this information, you can run simulations showing what it would look like for your client to self-fund potential LTC events.
Meanwhile, we can provide illustrations from a myriad of products, many with the ability to utilize different funding sources so that you can design a unique and tailored plan for each of your clients.
Oftentimes we are asked to be part of conference calls where we can help educate your clients about what LTC policies actually are, how they function, how they pay benefits, etc… Many times even if your clients can self-insure, the benefits of having a LTC policy continue to make them a good choice to incorporate into your planning.
Here are a few of the different strategies and policy types that AdvisorServe can help provide and discuss with you and your clients:
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Traditional LTC Policies
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Reimbursement only, typically paid with an annual premium using after tax dollars, these non-guaranteed policies have gone up in premium, but have stabilized over the past decade. Typically the most affordable way (short term) to pay for a LTC policy.
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Hybrid LTC Policies
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Combining a traditional LTC policy with a “bare bones” permanent insurance contract creates a unique policy that provides a minimal death benefit typically equal to the premium paid, a return of premium feature, and LTC benefits. Usually designed as a single-premium or short-pay, these unique policies are great options for people who can afford them. Oftentimes these are funded with a tax-free 1035 exchange from another permanent policy that they no longer need.
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Permanent Life Insurance Policies with LTC Riders
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Most insurance companies now offer LTC riders attached to their traditional permanent policies. This is a good option when your client has both a life insurance need and a LTC need. Monthly payout typically higher than other designs due to the fact that the payment is usually drawn as a percentage of the death benefit.
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Term Insurance Policies with LTC Riders
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Term insurance is typically purchased by younger people not yet interested in LTC planning. However, some newer term policies are adding LTC riders as part of the contract to expand the value of the term policy. For some advisors who’s goal is for clients to self-insure, having a term policy with a LTC rider is a good stop-gap measure while they are working towards retirement.
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PPA Qualified Annuities with LTC Riders
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PPA Qualified Annuities with LTC riders allow 100% tax free withdrawals from annuities regardless of gain when the funds are used for LTC. Many of these annuities have LTC Riders that expand the amount of money available by 2-5x for LTC. Ideal for client’s who have annuities with a lot of gain that don’t need them for retirement, or for clients who have health concerns, as the underwriting for annuities is much more simple than life insurance based LTC products.
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Tax Deductible LTC Policies as an Executive Benefit
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There is still the opportunity to purchase a traditional LTC policy with either a 10-Pay or Single Premium design. Business owners who want to provide a benefit to their executives may purchase a traditional LTC policy and deduct 100% of the premium. Please schedule some time to discuss this strategy with us.
