4 Ways to Insure for Long Term Care
Traditional LTC Insurance
These policies offer flexibility in benefits to help you design a plan that addresses your specific needs. It also may limit out-of-pocket expenses. Good health and partner discounts help reduce the cost of these premiums. Traditional LTC insurance policies are like car or home owner’s insurance in that you typically pay until you use the insurance. Therefore, these policies typically have smaller premiums but premiums might be paid much longer resulting in an overall higher cost if you do not use the insurance until much later in life. They also may qualify for your state’s Partnership Program, which means that every dollar in benefits paid from a long-term care policy will allow you to protect a dollar of your assets should you ever need to qualify for Medicaid. An advisor at SJK Wealth Management can consult with you on how the Partnership Program may benefit you. All traditional LTC products that SJK Wealth Management offer are tax qualified; however, not all premiums are tax deductible.
Permanent Life Insurance with LTC Riders
Many insurance carriers are now offering a long-term care rider that acts as an added benefit to a permanent life insurance product. This type of policy is advantageous for those clients who are primarily looking for life insurance, because they’re actually securing two forms of insurance in one package. Long-term care riders come at a cost and they allow you to use a percentage of your death benefit should you require long-term care instead.
Single Premium Life/Long-Term Care Insurance (Hybrid Life)
These product options, also known as linked benefit products, may be your best option to self-insure. This product offers a simplified application process for life and long-term care. In the event you don’t require long-term care, the death benefit will be paid income tax free to your requested beneficiaries. Such products may also include Return of Premium features that return the premiums paid for coverage if you survive the policy’s terms. At any time, you can request a return of premium upon full surrender of the policy. The amount received will be adjusted for any benefits paid and any loans and cash withdrawals. Note: It may have tax implications. These policies can usually be paid as a single premium or paid over a set period, for example payment for 10 years or until age 65. This can mean larger premium payments but in total may be cheaper than traditional depending on when the policy is used. Also, many clients like the fact that these policies pay out either a death benefit or LTC benefit so that they know their premium dollars will be recouped in some form.
Annuities with Long-Term Care Insurance (Hybrid Annuities)
These product options are typically used when there is an asset that can be earmarked for long term care expenses. They typically provide 2 to 3 times the investment in Long Term Care benefits. Annuity products with LTC riders can also be useful if simplified underwriting is needed. These policies provide tax deferred growth and typically earn a minimum guaranteed interest rate.
How to Choose Which Type of Insurance is Right for You?
The details and differences between these policies can be very confusing. In addition to the different type of coverage there are also many different insurance providers with nuances. Working with an Advisor at SJK Wealth Management can help determine which type of coverage is best for your needs. Additionally, because we are independent we can offer many highly rated insurance providers and help determine which best meets your needs as well. Call us today to learn more about your options. 267-880-6116.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.
The cost and availability of life insurance depend on many factors such as age, health, and amount of insurance purchased. In addition to premiums, there are contract limitations, fees, exclusions, reductions of benefits, and charges associated with policy. And if a policy is surrendered prematurely, there may be surrender charges and income tax implications.
Annuities are long-term investment vehicles designed for retirement purposes. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 ½ are subject to a 10% IRS penalty tax and surrender charges may apply.
Riders are additional guarantee options that are available to an annuity or life insurance contract holder. While some riders are part of an existing contract, many others may carry additional fees, charges and restrictions, and the policy holder should review their contract carefully before purchasing.
Any guarantees are contingent upon the claims-paying ability of the issuing company.