Better Alternative to Long-Term Care Insurance

This is the vehicle I use to project my money from potential long-term care costs.

If you have accumulated financial wealth, any retirement plan worth a grain of salt addresses the potential cost of long-term medical care.  You or your spouse are very likely to need some sort of personal help getting along during retirement. Whether the help comes to your home or you live in an assisted living facility, the potential cost is VERY high.

EVERYONE WITH ASSETS TO PROTECT SHOULD BE PLANNING FOR THIS

It’s a fear based in reality. According to the Fidelity Retiree Health Care Cost Estimate, an average retired couple age 65 in 2019 may need approximately $285,000 saved (after tax) to cover health care expenses in retirement. Of course, the amount you’ll need will depend on when and where you retire, how healthy you are, and how long you live.

For the past 30 years many prudent retirement planners were purchasing long-term care insurance to protect themselves from potentially massive ongoing health care costs. Unfortunately, most long-term care (LTC) policies were way under-priced by insurance companies.  When they figured this out, insurance companies were forced to increase their premiums on policies issued years prior.

What happened?

The LTC actuarial industry assumed too low of a (long-term care) claim rate, too high of a policy drop rate and too high on interest rates. All of this led to the fact that policyholders were undercharged and the insurers didn’t have the money needed to pay claims.

Since then, insurance carriers are crying poor to their state’s insurance commission so they can jack up prices for people that bought policies (underpaid) in the past. Over the past decade or two, most insurance carriers have gotten out of the long-term care insurance market all together. Genworth is still a major player and are one example of a carrier that is raising premiums on old policies.

Genworth raises long-term-care insurance costs an average 58%

Costs have been soaring and policyholders are stuck with paying the higher premiums or losing all the premium they have already paid.

source: http://www.altcp.org/long-term-care/long-term-care-cost/

Many big name carriers including John Hancock, Metlife, Allianze and CNA have gotten out of the business (old policies will be honored). Genworth Financial is the leading current insurer and they recently announced they will be making large premium increases to most of their older policies.

My favorite alternative for people who don’t want their life savings devastated by long-term care expenses is…..

Life insurance with an option to use the death benefit to pay for long-term care expenses

“USE IT OR PASS IT”

Brilliant Idea by Life Insurance Companies:

Life insurance has always been the asset of choice for wealth transfer/legacy planning. The death benefit is income tax-free and you lock in a guaranteed future value that provides an attractive after-tax equivalent return for conservative investors.

Thanks to major medical advancements, life expectancies are getting longer. This is a great thing for life insurance carriers since that delays death benefits being paid.

These days there are life insurance contracts that include policy riders that allow policyholders to take an advance on your death benefit (while you’re alive) if you have been diagnosed with a chronic illness. Some policies are more restrictive, or require a terminal diagnosis, before paying out.

The life insurance rider gives a policyholder, who is certified as chronically ill by a licensed health care practitioner and otherwise meets the terms of the rider, access to up to 100% of the death benefit of their life insurance policy. The insured can use 2-4% of the death benefit per month. So with a $300,000 death benefit, assuming you qualify, you could receive up to $6-$12,000 per month. This money is an advance on the death benefit and is income tax-free. It can be spent any way you want.

The Chronic Care Rider is the addition that makes all the difference.

Like an indemnity, the rider begins paying once the client is certified as chronically ill. The benefits can be used for any expense. chronically ill person can choose to spend the money any way they want with to strings attached.  Take a vacation with the money. Pay a family member to provide care, to buy groceries, to make a home handicapped-accessible, for professional care, medical supplies or medication, etc. No receipts are required. The rider is more affordable than long-term care insurance and its price will not fluctuate. Clients will not “lose” the benefit if they do not “use” the benefit. The client’s beneficiary will receive the life insurance policy’s death benefit less anything that was used as part of the chronic care benefit.

How my Life Insurance with Chronic Care Rider Policy Works: 

I have a $300,000 death benefit with a chronic care rider. There is great flexibility in the premium design. I decided to set up a guaranteed 15 year pay plan so that I make an annual premium payment of $8,000 for 15 years, whenever I die (guaranteed until age 120), my beneficiary will receive $300,000. If I qualify for the the chronic care benefit along the way (maybe I had a stroke or dementia) I can take an advance of up to $12,000/month tax-free and spend it any way I want. My policy allows a maximum of 4% ($300,000 x 4% = $12,000) monthly benefit so I could take up $12,000 per month. That benefit gives me peace of mind that I won’t be a financial burden on my kids and my financial legacy will be passed in tact.

Whatever is not used as part of the chronic care benefit is not lost, but passed on as an income tax-free life insurance benefit.

By planning ahead, you will vastly improve your ability to get the help you want in your very own home from the people you love. If you would like to take a look at this option for your retirement planning, contact us for a complimentary consultation. www.fortunefinancialgroup.com