Long Term Care

Traditional LTC Insurance Plans

Asset-based Hybrid Life/LTC Plans

Hybrid - Life with LTC/Chronic Illness Rider

Traditional LTC Insurance

This type of policy is what has been popularly sold for decades now. It pays a monthly benefit once a pre-chosen waiting period is satisfied and the insured is certified as being unable to perform two of the six activities of daily living or has a cognitive impairment.

Pros: Lower initial premium than hybrid options, great flexibility in choosing benefits, numerous inflation options, significant spouse/domestic partner discounts, numerous optional riders are available.

Cons: Premiums are not guaranteed and are likely to increase, premiums are payable for life unless on claim – no short pay options, no death benefit when benefits are not used, no cash value and only limited return of premium options, limited cash or indemnity benefits.

Asset-based Solutions

Known as “Asset-Based” because their design utilizes a strategy of moving assets from existing accounts to fund a program that leverages those assets at death and much more if a long term care event occurs. These plans are more focused on enhancing the long term care benefit than the death benefit as compared to a typical life with LTC rider hybrid plan. Since you are moving existing funds rather than paying a premium out of income, they tend to be single pay, 5 pay or 10 pay plans. Often, 80 to 100% of the premium is refundable even in the first year if the owner wants to withdrawal from the plan.

Pros: Short pay options are available, premiums are often 100% refundable, inflation options are available, some have indemnity based benefits rather than the reimbursement method, premiums can never be increased, up to 7 years of LTC benefit is available, a benefit greater than the amount deposited WILL be paid for LTC to the insured or at death to a beneficiary.

Cons: Large premiums required so client must have assets he can move that will not be needed in the future for other purposes. They may not provide enough LTC benefit to pay claims if total deposits are not adequate.

Hybrid Plans

These plans are much like the Asset Based Hybrid plans, but they general are paid for over a lifetime out of income. However, they certainly can be designed as short pay programs as well. In these plans the maximum LTC benefit is equal or less than the maximum death benefit. LTC benefits are paid in a variety of ways depending on the plan design: lump sum, discounted lump sum, or 2, 3 or 4% of the death benefit each month up to the maximum IRS per Diem amount. The death benefit is offset by every dollar, or more in some cases, of amounts taken to pay for long term care expenses. Most plans pay LTC benefits on a cash or indemnity bases rather than reimbursement.

Pros: Less cash flow required to fund than the Asset Based plans, premiums are guaranteed – can never be increase like traditional LTCi, return of premium options available after 20 years, the plan will pay off in a benefit to the insured or to a beneficiary.

Cons: Initial premium can be 2-3 times higher than traditional LTCi for the same LTC benefit, inflation riders are not available, LTC benefit available is less than Asset Based plans, LTC benefit options are very inflexible.

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What are the 6 Activities of Daily Living?  Bathing, Eating, Dressing, Toileting, Continence, Transfering in and out of bed or a chair.  To qualify for LTC benefits, a person must be unable to perform two of them due to a physical illness or disability or have a cognitive impairment.