Long Term Care Insurance Options

October 15, 2019

We discussed long-term care last year in the video shown here, but time and again we get questions about what long-term care insurance options are available. Over the last few years, we’ve seen tremendous changes in the long-term care insurance marketplace. Today, we’re going to break down the two different types of long-term care insurance available.

The first type is Traditional Long-Term Care insurance. Traditional long-term care is a “use it or lose it” type of insurance, where if the insured uses long-term care and the requirements are met, benefits will be paid. Traditional long-term care policies are usually structured where you will pay premiums for your lifetime, and those premiums can go up over time. With that said, this type of insurance can be beneficial for someone who can’t afford, or is unwilling to pay, a larger up-front premium.

A newer type of long-term care insurance is Asset-Based Long-Term Care insurance. This is a hybrid type of insurance that provides for long-term care benefits, but also has a life insurance or annuity provision attached to it. Unlike traditional long-term care insurance, there are three outcomes of asset-based long-term care insurance:

  • You get some form of a return of premium, should you decide you no longer need the coverage or want to cancel your insurance
  • You can utilize the policy for long-term care benefits
  • Should you continue the policy and not need long-term care, a death benefit will occur. It’s important to note that any long-term care benefits that are used will reduce the death benefit on the policy in some way

The benefits on asset-based long-term care insurance are generally locked in at issue, and the insurance company won’t raise your rates. With that said, it generally requires a much larger up-front amount of capital on some asset-based long-term care policies.

Both forms of long-term care insurance have options for inflation protection to account for the increasing cost of care over time. We think this is an important, and often overlooked, component in selecting the right plan for you and your family.

Whether it’s asset-based or traditional long-term care insurance, long-term care insurers will require you to go through underwriting before they insure you, which means the healthier you are, the lower the premium will likely be. Therefore, the younger you are when consider long-term care insurance, the higher chance you have of a favorable premium.

Everyone’s situation is different and determining your own need for long-term care can have a multitude of other factors to consider. At CenterPoint Financial Group, we encourage our clients to talk with us to fully understand their choices and life insurance needs before selecting a long-term care coverage option.

Guarantees are based on the claims paying ability of the issuing company. Long Term Care Insurance or Asset Based Long Term Care Insurance Products may not be suitable for all investors. Surrender charges may apply for early withdrawals and, if made prior to age 59 ½, may be subject to a 10% federal tax penalty in addition to any gains being taxed as ordinary income. Please consult with a licensed financial professional when considering your insurance options.