Long-Term Care (LTC) Planning should be an essential component of comprehensive financial planning for your clients to secure their future against the potential burdens of extended healthcare needs.

With extended Longevity, the possibility of requiring LTC services increases, making it crucial to incorporate robust strategies to protect your clients, their loved ones, and their assets while ensuring comprehensive care is provided when necessary.  Unfortunately. fewer than 20% of Americans¹ have implemented LTC Planning, so more than 80% have, by default or choice, a self-funding strategy as their "plan" to cover potential future care needs.   However, a more efficient and prudent approach has evolved, allowing Asset-Based LTC Planning solutions to effectively become Self-Funding on Steroids.

Understanding Asset-Based Insurance Solutions

Asset-based insurance solutions combine the features and benefits of life insurance or annuities to provide coverage for LTC.  They merge the elements of protection and growth, offering policyholders a guaranteed, multi-faceted approach to addressing their LTC Planning needs while potentially complementing wealth accumulation or providing additional death benefits for beneficiaries.  At the core, your clients carry their LTC Plan on the balance sheet as an asset rather than the income statement as an expense or, even worse, an "unfunded liability" that needs to be accounted for.

The Confusion Between Self-Insuring and Self-Funding

Self-insurance refers to setting aside funds to cover potential future liabilities or losses instead of purchasing traditional insurance.  In a typical self-insurance scenario, stop-loss insurance kicks in when covered expenses exceed a certain threshold.  At the individual level, this is often accomplished with a high-deductible insurance plan. 

Self-funding, however, means the complete assumption of responsibility for the potential liability.  From a financial planning perspective, there is no more significant insurable risk the advisory community allows clients to ignore.

How Asset-Based LTC Planning Solutions Work…..

Funding Mechanism:  Policyholders make lump sum or periodic payments to fund an annuity or life insurance policy with an extension/continuation of benefits rider.

Cost Certainty:  The premiums can be guaranteed never to increase.

Dual Benefits:  These policies provide benefits for LTC needs or a death benefit and cash accumulation.

Asset Protection: If long-term care isn't required, your client retains access to the cash value, or a death benefit is paid to their beneficiaries.

Flexibility:  They offer flexibility in premium payments and benefits, allowing policyholders to tailor the coverage to their preferences.

The "Steroid Effect" of Asset-Based Planning Solutions

The term Self-Funding on Steroids encapsulates the amplified leverage these solutions bring to LTC planning, and the most significant advantage over traditional self-funding may be how the plan becomes the key to access AND pay for care.  When The Silver Tsunami arrives at the end of the decade – when every Baby Boomer will be over age 65 – your client's insurance-based LTC Plan may put them in a preferential position versus others who are "private pay" or questionable sources.   Additional amplification is provided by:

Enhanced Funding Power:   Asset-based LTC Plans maximize the initial contribution made by policyholders, amplifying their ability to cover potential long-term care expenses.  Compared to traditional self-funding methods, these policies provide guaranteed magnification of their dollars, providing a more substantial pool of funds, and are usually Tax-Free when care is required.

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Risk Mitigation and Asset Protection:   These solutions provide a safety net against the uncertainty of future care needs.  Should policyholders require LTC, the benefits can help mitigate the financial impact, protecting their assets and savings.  Simultaneously, the flexibility ensures that if care isn't needed, the funds remain accessible for other purposes.

Investment Potential:   These solutions offer guaranteed benefits with the potential for cash value accumulation or investment growth.  Depending on the policy structure, the cash value may grow over time, providing an additional financial cushion or supplementing retirement income. 

Customizable Coverage:  Policyholders can tailor their coverage to their specific needs and financial situation.  This adaptability ensures that the policy aligns with individual preferences and evolving circumstances.

Asset-based LTC Planning solutions offer a dynamic and robust approach that combines insurance protection with potential financial growth and addresses LTC Planning needs with asset protection, leverage, and guarantees to epitomize "Self-Funding on Steroids."  

We look forward to working with you to address your clients' Long-Term Care Planning needs and empower them to make informed decisions about their future care needs.

¹ The OneAmerica LTC Consumer Market Survey, administered by Hanover Research, March 2022, https://www.oneamerica.com/campaigns/survey/ltcsurvey