4 Out-of-the-Box Long-Term Care Insurance Solutions

You have a client who could benefit from and is interested in long-term care insurance (LTCi)! The problem? Traditional LTCi just isn’t the right fit.

It costs too much. The “use-it-or-lose-it” nature of the policy stinks. Maybe the client was already declined — it’s not even an option for them.

Whatever their objection or situation, it doesn’t necessarily mean your client (and you) are out of luck. You just have to think out of the box!

There are four products that can be great alternatives to stand-alone LTCi. Let’s take a closer look.

1. Short-Term Care Insurance

The American Association for Long-Term Care Insurance reports, “almost half (49%) of long-term care insurance claims last one year or less.” This time frame is typically how long STCi provides coverage, making it an one of the best alternatives to long-term care insurance!

Rates for an STCi policy can be lower than rates for an LTCi policy, especially for women. STCi rates are not gender-based like LTCi rates!

STCi rates are not gender-based like LTCi rates!

Additionally, many policies offer a return of premium option. This allows the policyowner to keep their initial investment if they surrender the plan.

STCi products also tend to have more lenient underwriting and higher issue ages (e.g., 84 or 89 years old) than types of LTCi.

Many even have 0-day elimination periods.

2. Annuities with Long-Term Care Riders

Annuity/LTCi combination products can be a fantastic, asset-based LTCi solution for certain clients. They have a base annuity contract and a built-in accelerated LTC benefit rider. The annuitant can use their policy’s accumulated value to pay for qualifying LTC expenses in their home or at a care facility.

The annuitant can use their policy’s accumulated value to pay for qualifying LTC expenses in their home or at a care facility.

Any gains that go toward paying for LTC do so tax-free. The annuitant can leave any unused money in their account to a designated beneficiary.

Annuity/LTCi combination products are often designed as fixed or indexed annuities and can be immediate or deferred. Clients can have a multiplier built into the policy to give them a larger LTC benefit than their investment.

They can also add a continuation of benefits rider to the policy. This allows the LTC benefit to continue for a certain period of time once the annuity value is exhausted.

These products require minimal underwriting, that’s often streamlined and less stringent than underwriting for traditional LTCi. One policy may even be able to cover two lives (e.g., husband and wife)! It depends on the carrier, plan, and state.

3. Combination Life Insurance & LTCi Products

Life/LTCi combination products, another form of asset-based LTCi, consist of a life insurance policy with a built-in acceleration of death benefit rider.

Policyowners can use their death benefit to pay for qualifying LTC expenses tax free in their home or at a care facility. The policyowner’s beneficiaries receive what remains of the death benefit tax free.

Policyowners can use their death benefit to pay for qualifying LTC expenses tax free in their home or at a care facility.

Some carriers include a residual death benefit with the policy. This feature allows the policyowner’s beneficiaries to receive five to 20 percent of the original death benefit, even if the policyowner completely exhausted it to pay for LTC.

Policyowners don’t have to lose their initial investment if they surrender the plan. There’s typically a return of premium built into policy.

It’s important to note that clients need to be in average or excellent health for these types of policies. They require underwriting that can be streamlined or full. One policy may also be able to cover two lives (e.g., husband and wife)! It depends on the carrier, plan, and state.

4. Life Insurance with LTC or Chronic Illness Riders

If a life/LTCi combination product isn’t the best fit for your client, they may be able to purchase a universal life or whole life policy and then add an LTC or chronic illness rider to it.

Both riders allow the policyowner to access their death benefit tax free to pay for qualifying LTC expenses. Again, if the policyowner doesn’t need all their LTC benefit, their heirs receive what’s left of the death benefit tax free.

LTC or chronic illness riders allow the policyowner to pay for qualifying LTC expenses tax free.

Life insurance with a qualified LTC rider falls under tax code 7702B. Generally, this means agents must complete LTC CE training to sell these products, and the qualifying conditions for a policy may be recoverable or permanent. Clients must pass underwriting for both the life insurance policy and the LTC rider.

Life insurance with a chronic illness rider falls under tax code 101(g). Generally, this means agents don’t have to complete LTC CE to sell these products, and the qualifying conditions for a policy must be permanent in nature. Clients usually only have to pass underwriting for the life insurance policy itself.

With these life policies, premiums are protected from rate increases. There is no return of premium option, but clients may have access to their policy’s cash surrender value, depending on the plan.

While traditional, stand-alone LTCi will still be able to provide many clients with the most coverage for their money, it is not a product all clients are willing, or able, to buy.

Being prepared to discuss alternative LTC solutions, like STCi, annuity and life LTC combination products, and life insurance with LTC and chronic illness riders, will only allow you to help more individuals, grow your client base, and secure more sales.

Looking for more info on selling LTC? We can answer your questions or walk you through a tough case! Register with Ritterfor free to get started.