LONG TERM CARE PLANNING
The facts and circumstances of each individual situation will determine the most appropriate choice for long term care (LTC) insurance. It is important to consider multiple alternatives and understand the advantages and disadvantages of each.
LTC insurance has three major offerings:
Standalone (individual) LTC insurance
Asset-based or “hybrid” Life/LTC using a life insurance with leverage for LTC benefits
Qualified LTC accelerated benefit riders added to individual life insurance policies
Comparing LTC insurance alternatives purely on a premium basis may not take into consideration all factors that should be evaluated in the purchase decision. Each form of LTC insurance has its own advantages relative to other options:
For those who are primarily focused on the LTC need, standalone LTC insurance policies offer the most diverse set of customization options. Standalone policies also generally offer the strongest Cost of Living Adjustment options and may give the policyowner more choice as to where and how care is received. It is important to note that premium rates in standalone LTC insurance policies are rarely guaranteed. In addition, the lack of death benefits in these policies requires the purchase of an accompanying life insurance policy to address both needs.
For those where life insurance is the primary need, or for those who seek more flexible premium funding options, life insurance with an LTC accelerated benefit rider may be the better choice. The product choice and design will dictate the specified premium and the duration of premium payments. It is possible to “lock in” a premium for the life of the policy. However, this will be subject to contract guarantees as stated by the issuing Carrier.
Asset-based or Hybrid Life/LTC products offer a lesser degree of death benefits than individual life products with LTC riders and fewer customization options than individual LTC policies. However, they may be the easiest of the three products to underwrite, and the single premium option may be easy for clients to understand when presented as a re-positioning of assets to accomplish two insurance purposes. Single pay designs can also preclude the client from being subject to premium increases in the future.
Many would like to self-insure, but do not receive the leverage or tax-free benefits obtained through life or long-term care insurance products. Additionally, other valuable services embedded in LTC products such as concierge care coordination services that help a family will have to be paid out-of-pocket. While this may be appealing, not having a defined income stream to pay for care could create conflicts among those providing care, family, friends, and heirs to an estate. Family dynamics should be considered (step-children, ex-spouses, etc.). If this option is pursued, a written plan on how care should be provided—by whom, and how it will be paid for—should be developed and included with other important documents.