A New Arrow In Our Quiver When Planning for Long-Term Care
Long-term care planning has evolved significantly over the past decade. Gone are the days of traditional long-term care insurance. When I say traditional, I mean the kind I sold early in my career (early 2000’s) until most of the insurers exited the marketplace and/or drastically increased premiums.
Today, most of the long-term care sold are through hybrid life and long-term care policies OR a true life insurance policy with a long-term care rider. They’ve largely replaced traditional standalone LTC policies because many offer guaranteed pricing, some offer liquidity options and some offer a life insurance death benefit that is reduced by any long-term care payments.
We now have a new arrow in our quiver when helping clients and advisors plan for long-term care planning.
Long-term care planning isn’t about finding “the best product.” It’s about finding the right fit.
A New Arrow in Our Quiver
It’s an annuity with a long-term care rider — and while it’s not always our first choice, it is a very solid option for the right situation. With this annuity-based LTC solution, the health underwriting process is much more simplified allowing more clients to qualify than with Hybrid LTC solutions that can sometimes frustrate potential insureds with the lengthy and often times stringent health underwriting process.
Comparing Two Ways to Fund LTC
Assuming $150,000 premium | Female, Age 65, Non-Smoker | Indemnity benefits
Below is a simplified snapshot of how two strategies compare.
1. Annuity + LTC Rider
(3% Guaranteed Compound Inflation)
At Issue
| Monthly LTC Benefit: | $6,397 |
| Total LTC Pool: | $460,588 |
| Death Benefit: | $153,529 |
| Surrender Value: | $139,712 |
At Age 85
| Monthly Benefit: | $10,186 |
| Total LTC Pool: | $733,368 |
| Death Benefit: | $244,456 |
| Surrender Value: | $244,456 |
Strengths:
| ● | Simplified health questions (not full underwriting) |
| ● | Guaranteed 3% compound inflation |
| ● | Strong cash value growth |
| ● | Can use a 1035 exchange from old life insurance cash values |
| ● | Attractive at older ages |
Tradeoff: LTC leverage is lower than hybrid LTC.
2. Hybrid Life + LTC
At Issue
| Monthly LTC Benefit: | $7,085 |
| Total LTC Pool: | $549,941 |
| Death Benefit: | $170,000 |
| Surrender Value: | $85,020 |
At Age 85
| Monthly Benefit: | $12,796 |
| Total LTC Pool: | $993,254 |
| Death Benefit: | $170,000 |
| Surrender Value: | $153,555 |
Strengths:
| ● | Strong inflation-driven growth |
| ● | Largest long-term total benefit pool |
| ● | Balanced leverage + protection |
Tradeoff: Full underwriting required.
The 1035 Opportunity Most People Miss
One of the most powerful uses of this strategy is repositioning. If someone owns:
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An old life insurance policy with significant cash value |
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A contract purchased decades ago that’s no longer needed for death benefit |
That cash value can potentially be 1035 exchanged into an annuity with an LTC rider — repositioning idle dollars into future care protection without creating a taxable event.
That alone makes this solution worth reviewing.
Final Thought
Long-term care planning isn’t about finding “the best product.” It’s about finding the right fit for:
| ● | Health |
| ● | Age |
| ● | Liquidity |
| ● | Underwriting tolerance |
| ● | Legacy goals |
The traditional hybrid policies are still my favorite in many cases. But having a strong annuity-based alternative — especially one with guaranteed inflation and simplified health questions — fills an important gap.
Having the right arrow in your quiver matters. Let us help you find the right fit.
The material contained in the newsletter is for informational purposes only and is not intended to provide specific advice or recommendations for any individual nor does it take into account the particular investment objectives, financial situation or needs of individual investors. All examples are hypothetical and are for illustrative purposes only.