Planning for Long-Term Care: A New and Innovative Solution

I just wrote about planning for Long-Term Care in my June blog, but lately, this topic comes up more than any other insurance planning topic.

Long-term care (LTC) planning has changed significantly over the past decade, offering individuals and families more flexibility, better tax advantages, and simpler underwriting paths. As more Americans look for ways to protect themselves against rising LTC costs, two modern strategies have emerged as particularly effective.

At Colton Groome, we focus on helping clients confidently understand these options — especially when balancing health history, existing assets, and long-term goals. Today’s “Did You Know?” explores two of the most compelling solutions available today:

• Leading Hybrid LTC Option (life + LTC combined)
• New Annuity + LTC Option (a fixed annuity with built-in LTC benefits)

Both are designed to provide cash indemnity benefits, meaning the monthly LTC benefit is paid directly to the client and can be used however they choose — from home care to facility care to informal caregiving. But their structures, underwriting, and funding options differ in meaningful ways.

Why This Comparison Matters

For years, hybrid LTC solutions have been the preferred choice for individuals in good health who want leverage and inflation protection. However, they require more extensive medical underwriting and must be funded with new cash.

The new annuity-based LTC option brings something uniquely valuable to the table:

• Simplified underwriting (5 knockout questions)
• No medical exams or lengthy interviews
• Ability to use an existing annuity through a tax-free 1035 exchange
• Guaranteed LTC benefits with predictable costs

This opens the door for individuals who previously may not have qualified for traditional or hybrid LTC products.

1. Underwriting: The Key Difference

Leading Hybrid LTC Option

• Full medical underwriting
• Tele-interview and possible medical records
• Best suited for individuals in good or excellent health
• Offers the highest leverage and strongest long-term benefit growth

New Annuity + LTC Option

• Just 5 simple knockout questions
• No health interview
• Cognitive screen only for applicants age 70 and above
• Ideal for individuals with moderate health issues or those seeking a faster, simpler approval process
• Highly appealing when an existing annuity can be repositioned tax-free

In short: Hybrid LTC offers the most value if you qualify. The annuity-based option is the powerful alternative when underwriting is a concern or when an existing annuity can be used to fund benefits tax-free.

2. Funding Flexibility

Leading Hybrid LTC Option

• Must be funded with new cash, savings, or investments
• Does not accept 1035 exchanges from annuities

New Annuity + LTC Option

• Allows full 1035 exchange from an existing annuity
• Converts tax-deferred annuity value into tax-free long-term care benefits
• Often the most tax-efficient solution when a client already owns a non-qualified annuity they no longer need for income

Sample Comparison for a 60-Year-Old

(Based on actual illustrated values using approximately $95,000 in funding)

Which Option Is Right for You? 

The Leading Hybrid LTC Option may be the best fit if:

• You are in good health
• You want the strongest long-term leverage
• You value inflation protection
• You want predictable, guaranteed benefits

The New Annuity + LTC Option may be ideal if:

• You prefer simplified underwriting
• You have an existing annuity you can exchange tax-free
• You want guaranteed LTC benefits with minimal health requirements
• You prefer a single-premium design with no ongoing payments

Final Thoughts

Both solutions offer meaningful ways to protect yourself from the rising cost of long-term care while maintaining control, flexibility, and dignity. The right choice depends on your health, financial profile, and the assets you already hold.

If you’d like to explore which approach best fits your situation — or if you want to see a personalized comparison like the sample above — we’d be happy to help.