How Long Term Care and Life Insurance Fit Together

Life Insurance is one of the key pieces of a successful financial plan, but have you thought about how it can be used to pay for your clients Long Term Care? The Long Term Care market has been experiencing numerous changes. Currently, only a handful of companies are selling regular long-term care insurance. Those still in the industry are pulling back, limiting their products and rapidly changing their pricing. Why is this happening?

The Long Term Care industry knows that in the future, claims are going to be very large and last for a longer duration. Due to advanced medical technology, people are living longer and increasing the need for all types of services. These services range from home care, assisted living facilities and nursing homes. Due to the likelihood of our extended life spans, it is increasingly risky for people to enter their retirement years without a strategy in place to protect their life savings from the inevitable cost of Long Term Care. Now more than ever, it is clear that Long Term Care insurance is essentially a planning tool for retirement.

So what are your clients’ potential solutions? There are a few different ways to purchase Long Term Care (LTC). First there are the traditional, stand alone products that have gone through significant changes. Then we are seeing new and creative solutions coming to market, where life insurance is used as a potential Long Term Care solution. These products are sometimes known as Hybrid Products or Linked Benefit Products.

In a typical stand alone LTC product, it is a clear case of Use it or Lose it. So if Aunt Anna lives until she is 75 and never needs to use her Long Term Care Insurance, then upon her death, it just goes away. A Hybrid, on the other hand, is actually Long Term Care plus Life Insurance. So if Aunt Anna had paid the premiums on this product, her cumulative payments would have created a long term care benefit, as well as a death benefit and a cash surrender value.

Keep in mind that the market has recognized that new solutions are needed to meet the advancing age of today’s baby boomers. America’s 78 million baby boomers are over the age of 65 and each year, millions of new boomers add to the swelling aging population. While the baby boomer population is well educated, relatively well off and healthier than previous generations, as they grow older, they will need more help. The question is how will families meet the rising Long Term Care costs without wiping out their entire portfolios?

Planning ahead is the key to success. Many people don’t take the time to look at the big picture when it comes to financial planning for their old age. If you wait until you are in the stage you’re planning for, you might find yourself inadequately prepared. The availability of high quality solutions presents a tremendous opportunity for property and casualty agents to protect their clients so that their entire portfolios are not put at risk.

There is no right or wrong in comparing the traditional LTC products versus the newer hybrid products. In fact it may be worthwhile to consider a smaller traditional product combined with a hybrid product. Give your clients the best of both worlds and offer them a plan that limits rate increases and the potential that all the premiums could be lost at death. By adding the hybrid products you:

1. Resolves the Use It or Lose It potential that most traditional policies have.
2. The premiums in many of these hybrid policies are often guaranteed and cannot be subject to price increases.
3. Allows an exit strategy for the client who might want to surrender the contract for its cash value.
4. The policy can provide other valuable benefits. For instance, it can provide forced savings, building cash value, and providing needed life insurance for family estate liquidity.

Your questions and feedback are very important to me. Please email me at Michael@SWANWealth.com

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