4 Ways to Fund Hybrid Long-Term Care Insurance Agents Should Mention

Cash may be king, but if your clients don’t have it, that doesn’t have to stop them from purchasing long-term care insurance.

Hybrid long-term care insurance (LTCi) can be a fantastic alternative to stand-alone LTCi, but not just because it can be cheaper and easier to qualify for. Your clients can also fund it through existing assets they have in possession!

When you’re selling long-term care hybrid policies, also called linked-benefit policies, let your clients know they can pay for it these four ways.

1. Cash Equivalents

Like other types of insurance, you can fund hybrid LTCi policies with cash or “cash equivalents.” We consider cash equivalents to be anything like CDs or bonds.

Some of your clients may have enough cash or cash equivalents to pay for a lump-sum policy. That’s OK; not all hybrid LTCi policies are single-pay. Multi-pay hybrid LTCi policies area available!

Some multi-pay LTCi policies extend payments out as far as 15 to 20 years or longer! Carriers are extending premium options to help make their rates more affordable.

2. Life Insurance

Does your client have a life insurance policy they purchased years ago with a large death benefit? If their kids are grown and on their own, your client could trade in that policy for a new one with a lower death benefit and cheaper premiums. Or, using a 1035 exchange, you can help your clients exchange an old life insurance policy for hybrid LTCi.

Using a 1035 exchange, you can help your clients exchange an old life insurance policy for hybrid LTCi.

With an annuity/LTCi or life/LTCi combination product or life insurance with an LTC rider, they can protect themselves from their next biggest financial risk: needing LTC.

3. Non-Qualified Annuities

Your client has non-qualified annuity. Good news! They may be able to use that to fund an LTCi policy.

To trade in a non-qualified annuity for hybrid LTCi, you use the same tool involved with trading in life insurance for hybrid LTCi — a 1035 exchange.

It’s important to note, you can only trade an annuity in for a hybrid annuity/LTCi product or a qualified, traditional LTCi plan. You cannot use an annuity to purchase a hybrid life/LTCi combination product or a life product with a long-term care rider.

To trade in a non-qualified annuity for hybrid LTCi, you use the same tool involved with trading in life insurance for hybrid LTCi — a 1035 exchange.

4. Tax-Qualified Funds

Many people also have what’s known as tax-qualified funds, like IRAs, 401(k)s, 403(b)s, and tax-qualified annuities. If your client has one of these types of accounts, they can also finance their hybrid LTCi.

There are two primary ways clients can use tax-qualified money to fund long-term care solutions:

• A: The carrier allows a tax-free transfer of the funds to their tax-qualified annuity. Then, they calculate a 10-year life premium, funded by the tax-qualified annuity. The carrier treats the distributions from the annuity as a required minimum distribution (RMD), so the policyholder is still taxed on the money but over a 10-year period.
• B: The client purchases a single-premium immediate annuity (SPIA) with their tax-qualified funds. Then, the carrier uses the taxable annuity distributions to fund the LTC solution.

If you have clients who are concerned about extended care and want to leverage existing assets to protect against the risk of needing care and have downside protection of preserving assets, selling hybrid LTCi could be a good solution. Many people have cash equivalents, life insurance, annuities, and retirement plans.

If needed, you can help them reposition their assets to fund hybrid LTCi and help them enjoy lower-stress, financially set, and fearless retirement!