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Why is Long Term Care insurance so complicated?

July 28, 2017

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Advantages of Asset Based Long Term Care Insurance

February 21, 2017

 

Long Term Care insurance is one of the products I'm asked the most about these days.  It's probably because of my age and those that I associate with getting to the point where they are caring for elderly parents.  There are several reasons to seriously consider a Long Term Care policy.

 

Couples should especially consider LTC because the odds of one partner needing long term care is over 90%.  Some people still have concerns about the cost, rising premiums and the biggest, the possibility that they'll never use it. 

With term life insurance most people never worry about whether or not they will use it because they need to be covered in case something happens during their primary earning years and periods when they are responsible for paying mortgages or raising kids.  Also, because it's inexpensive, no one really asks about the odds of not using it.  

 

In the case of LTC, the policy premiums for a couple can be very expensive.  In addition, there are no guarantees on premium increases as there are with a level premium term life policy.  The add in even the relatively small possibility that the policy won't be used, and one can see that the objections to buying a traditional Long Term Care policy are substantial. 

Now, asset based policies are a different story and present a valid approach for many people who want to protect assets and who have accumulated a bit of cash.  If you aren't familiar with an asset based policy, the basic idea is that in one form or another a long term care policy is melded with either an annuity or a whole life type product.

 

The purpose of this hybrid product is that you are guaranteed some payout and you have guaranteed premiums.  In the case of a hybrid with a life insurance policy, a minimal amount of life insurance is guaranteed in the case that you or your spouse do not use the long term care benefits of the policy.  So, you are covered if you use the policy and you are covered if you don't.  The other advantage is that the policy does also provide some cash value.  How much depends on the structure of the policy, but at some point in the policy life, there can be enough cash in the policy that a holder could simply cancel the policy and take the cash or even take a loan out against the policy in an emergency.  

 

This type of policy makes a lot of sense and can be paid with a one time large premium.  Many policies have other payment options such 5 years, 7 year, 10 years, and even 20 years.  In all cases the premiums are guaranteed not to change.  

The numbers on these policies can be very beneficial as well.  If your agent structures the policy right for you, the LTC benefits can compete very well with stock market returns with the benefit of being guaranteed.  

Many people aren't aware that this Long Term Care insurance option is out there, but it's one that every person should know about and consider.  

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