How to Buy LTC Insurance

Long-term care (LTC) insurance premiums are skyrocketing. Do you have a plan?

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    How to Buy LTC Insurance

    How to Buy LTC Insurance

    Finding Alternative Strategies to Fund LTC Costs

    Advisors know all too well the treacherous terrain of shopping for long-term care (LTC) insurance. Skyrocketing premiums and an insurer exodus from the marketplace have cast a pall of uncertainty over the future viability of traditional LTC policies.

    LTC Funding Options

    For advisors looking to help clients protect themselves from the financial risks of LTC, several alternative funding options exist, though each has its own set of advantages and disadvantages:

    Self-Fund—With proper planning, individuals can create sufficient savings to fund, in whole or in part, potential future LTC costs. Those closer to retirement can look at carving out existing retirement assets as a funding source.

    Of course, not all clients are in a position to self-fund, or it may require some sacrifice in retirement spending, but self-funding does offer the advantage of maintaining control of assets to spend, donate or transfer to heirs should they go unneeded.

    Cash Value Hybrid Policies—Many insurance companies now offer hybrid policies that are either based on annuity or life insurance cash values. These policies have the advantage of protecting against LTC expenses, while also providing owners with access to cash or a death benefit in the event that LTC assistance proves unnecessary.

    While many clients may balk at LTC insurance’s “use it or lose it” nature, they may be more receptive to alternatives that allow for a return of premium or a death benefit payment. Such hybrid policies often require large premium payments over shortened time frames, so they may be an unrealistic option for some clients. Buyers generally should not expect to benefit from any meaningful investment return since these policies’ primary objective is risk management.

    In any event, these policies will vary widely on the basis of coverage, fees and liquidity, so extensive due diligence and research are highly recommended. However, once the basic research is completed, advisors may have a viable option for clients seeking to protect their retirement income security.

    Modified Traditional LTC Policy—If a client believes in the enduring presence of a particular LTC insurance provider, the costs of traditional policies may be reduced through shortening the benefit periods, capping the maximum benefit or by extending the waiting period before benefits are payable.

    For more information about how much to save for retirement, read this post:

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    Director of Insurance Products 
    631.439.4600, ext. 177 


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