A couple of weeks ago I wrote about the need for Long Term Care coverage, and the guarantee that your premium dollars would not go to waste by using Life Insurance with a Long Term Care Rider. Now we will look at another option to obtain Long Term Care and how to ensure your premium dollars do not go to waste should you not need the Long Term Care (LTC) coverage.
In reality we all may need LTC coverage. The majority of the people who purchase it have assets they want to protect in the event they need long term care for an unforeseen illness. I have been in the investment business for over 20 years and have seen many clients simply pass on without the need for LTC. They have spent years paying premiums for a policy they never used. That is what insurance is for right? We pay a little bit now in the event an insurable event happens. Think of your car insurance, for example. You pay every year, and hope you never get into an accident. Then at the end of the policy term you are happy to receive the renewal policy without having to use the coverage. It is the same principal when purchasing a traditional LTC policy. Advisors and insurance agents have long questioned paying for LTC because the cost can be high, with no return to the client.
What if there was a LTC Policy that can offer long term care, life insurance or your money back? Good news – there is ! It is called “Asset Based Long Term Care” Insurance.
With Asset Based LTC, you simply use an asset to make a one-time payment. There is, of course, underwriting that goes into these policies which will ultimately set the rate of return on your investment and in turn your set your benefits. If you choose the least amount of underwriting (a phone underwriting interview) your benefit accumulation will not be as great as if you chose the normal underwriting process of blood work, giving doctor information and a physical. Either way this may be a great choice for you. Typically, this is a good option for the mature generation (late 50’s to 70’s) as opposed to the youth who are just starting out having very little assets. In NYS, there are is also a minimum death benefit requirement of $75,000 and a one-time asset payment of $35,000.
Let’s look at an example for more clarity:
Mrs. Daniels is in good health, has been married for 30 years, she and her husband have two children. After 25 years as an RN, she retired last year. She has over $300,000 of available assets. She chose to purchased a LTC policy at age 60 through the normal underwriting process and was able to leverage her $100,000 initial one time premium more than 7 times for a total of $714,876 in total long term care benefits. This offered $9,929 each month to pay for covered LTC expenses for 6 years. She did become very ill and used up most of the LTC benefits. However, at her death the policy did pay a residual death benefit of $23,829 to her beneficiary.
What if Mrs. Daniel’s did not need LTC? Let’s look at 3 other scenarios:
1. If Mrs. Daniels did not need LTC benefits, she will be able to leave a $238,292 death benefit to her husband or children as her beneficiary.
2. Five years after purchasing LTC, let’s say Mrs. Daniels wanted to invest in a new business her son was starting. She could cancel the LTC policy and use the $100,000 to help him get started.
3. If Mrs. Daniels had a LTC event and used $100,000 of her benefit she would still have $138,292 for her beneficiary at the time of her death.
With an Asset Based LTC Policy, you know your hard earned money will not go to waste in any way. Having a policy that will cover you in the event you need LTC coverage shouldn’t keep you up at night. Knowing that your premium is always there for you, will help you sleep better.
Richard Montenegro, Jr.
FIS Marketing, LLC
3900 Veterans Memorial Highway
Suite 251 (Field Office)
Bohemia, NY 11716