Long-Term Care Insurance Update

{4 minutes to read}  Today, I would like to discuss, and update you, on the long-term care insurance market. Once again, as longevity risk and low-interest rates are continuing to put pressure on insurance companies, we’re seeing more increases. Companies are going back to their existing long-term care policyholders and raising their premiums.

Years ago, I wrote about the movement from the traditional long-term care policies that came out about 30 years ago, towards combination products, sometimes referred to as hybrid or linked benefit products.

I’m a big believer in these products for our clients. A traditional long-term care policy has a single function: to provide benefits if, and I stress the word if, someone makes a claim for long-term care because they can’t do two out of six Activities of Daily Living (ADL) — or have a cognitive impairment like Alzheimer’s or dementia. Many people who own long-term care policies might live from the time they buy their policy — let’s say from age 50 to about 80 or 90 years old and never make a claim. That means that the cost of the policy did not provide any economic benefit to the insured.

As an alternative, combo products — where you buy a life insurance policy with a long-term care rider, or what we call a linked benefit or a hybrid product are in my opinion the better solution. A greater share of the market has been moving towards these products, and we offer some great ones that provide utility regardless of what happens.

For instance, if you bought a life policy with a long-term care rider or one of the hybrid products, there would be three pools of money:

• Cash Value Pool
• Long-Term Care Pool
• Death Benefit Pool

If you died and never made a long-term care claim, the money you put into the policy would increase substantially because there would still be a death benefit.

Let’s say you put money into these policies but then needed money later on. There is an increasing pool of money called the cash value. It’s possible that you’ll pay into these policies for 10-20 years before you need money for an emergency. You can use the cash value, and still, have a death benefit and a long-term care benefit available. It’s possible to use one, two, or all three of these pools of money.

Obviously, when you use the money for income (or whatever), you’re going to lower the other two pools. In those situations, managing the policy is of the utmost importance in order to preserve the Death and Long-Term Care benefits.

I feel that we will continue to see an even greater movement toward these hybrid products, and possibly very few, if any, selling their traditional long-term care products. Right now there are only about a handful of carriers out there selling the traditional long-term care policies.

Even if you own a traditional long-term care policy, we recommend you also have these alternative products. That’s because many people have been receiving notifications saying their premium is going up for long-term care — and having hybrid products would give you more flexibility with regard to lowering or eliminating your policy if you also have a life policy combination or a hybrid product backing up your long-term care.

Any retirement plan that doesn’t have solutions for long-term care is potentially at risk. Give us a call and let’s discuss how we can utilize some smart planning so that you can protect your retirement income and your wealth from the cost of long-term care.

Registered Representative offering Securities through American Portfolios Financial Services, Inc. (APFS) Member FINRA/SIPC. Investment Advisory Services are offered through G&G Planning Concepts, Inc. which is not affiliated with APFS.  Strategic Wealth Advisors Network and Gassman Financial Group are not affiliated with APFS.

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