Long-Term Care Planning Using Life Insurance

The primary goal of implementing a Long-Term Care plan is to provide a source of funds to cover the costs of Long-Term Care when it's needed.   By Long-Term Care, we’re not just referring to nursing home care, as there are various levels of care, including assisted living, home health care, community care, etc.  Where those dollars come from is not really important, so long as they're available when needed!!  Unfortunately, the media and financial planning "pundits" all too often mention how “difficult” it is for advisors and their clients to plan for future Long-Term Care needs. 

Perhaps those comments about “traditional” Long-Term Care insurance solutions are true, as an extended low-interest rate environment and mispriced products have created ongoing challenges. However, the marketplace for alternatives to stand-alone, "traditional" products continues to expand, and there are an increasing number of new, high-quality "Asset-Based" or “Linked-Benefit” solutions - built on a life insurance chassis - for today's advisor or consumer to consider.

Asset-Based Long-Term Care Solutions

Asset-based solutions, as we've discussed previously, have been available for more than 30 years and provide benefits similar to traditional Long-Term Care insurance.  However, Asset-based solutions have become extremely popular because of their flexibility, "Live, Quit or Die" value proposition, and the cost certainty of a Long-Term Care plan.  You can help clients create a Long-Term Care plan utilizing a variety of funding sources, often reallocating a portion of their assets into these solutions.  While the majority of Asset-Based Long-Term Care solutions are funded in a lump sum or exchange, there are several carriers that offer the flexibility of multi-pay solutions.   

Asset-based solutions guarantee that the policy will be used—either as Long-Term Care benefits several years into the future, by passing on the residual value to one's heirs, or by surrendering the contract for its cash value. The "Live, Quit or Die" value proposition is also a significant reason these solutions are being implemented in record numbers, especially among those who would not have considered traditional Long-Term Care insurance.

“Linked-Benefit” Long-Term Care Solutions

There are many consumers who may lack the assets or liquidity to fund an Asset-Based Long-Term Care solution with a one-time deposit, but they still want cost certainty built into their plan.  In these situations, we often recommend a Long-Term Care solution commonly referred to as a “Linked-Benefit” Long-Term Care plan.  Today's linked-benefit solutions provide the opportunity for consumers to:

• Create a “pool of money” using the LEVERAGE of life insurance paid annually.

• Use the death benefit while alive, usually TAX-FREE, if 2 of 6 the “Activities of Daily Living” can no longer be performed.

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• Implement a plan when a client might not QUALIFY for stand-alone LTC insurance solutions due to adverse health concerns.

• GUARANTEE a benefit will be realized – Either for Long-Term Care needs or passed on to one’s heirs.

It’s essential to plan for potential Long-Term Care needs, and we encourage you to do so in the context of an overall planning process.   As financial planning and risk management for Long-Term Care continues to evolve, the available solutions are also evolving, so it's important to work with a professional to help you through the Long-Term Care planning process. 

There are many options to fund a client's LTC Plan, and using life insurance could be a good one.

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