Long Term Care – 3 Viable Options

Few people like to think about the possibility of the need for long term care coverage. Most think in terms of “nursing home” insurance, when in fact it is important to be educated on what types of long term care insurances are available, and how they differ in payout dispersal when claims are triggered.

All long term care contracts pay out on not being able to perform certain aspects of daily living. These include but are not limited to needing assistance with eating, dressing & cognitive impairment. A traditional Long Term Care contract is a reimbursement arrangement whereby the carrier will coordinate with the facility and pay them based upon the terms of the contract up to benefit amount that was purchased. The premium for a $7500 monthly benefit with a pool of $540,000 for a 61 yr old male and 55 yr old female couple would be approx. $4200 per year. Insurance carriers pay providers directly as claims are filed, and reimburse only what was spent.

A second approach would be to purchase a product that is identical to the above with one exception. Upon claim, the carrier would pay the chosen monthly benefit directly to client. This provides the unique opportunity to do with these monies what you will, such as providers, bills, food, or to build a ramp up to the house for accessibility, etc. Comparing to the above benefit example, the premium for a $500,000 pool of money for the same 61 yr old male and 55 yr old female couple at $7500 per month, would be approximately $4600 per year.

A third and perhaps the most compelling option would be a single premium product that provides two benefits to the policy holder. For those who are approaching retirement age who have not yet planned for long term care expense, and have monies in CD’s that are earning paltry returns, or perhaps a sum of money dedicated specifically for long term care, a single premium long term care/life insurance product can be an opportunity to leverage these assets. For a 61 yr old male, a $100,000 one time premium payment provides a guaranteed death benefit of $160,000 and a long term care benefit of $480,000. This would provide a monthly benefit of $6682 paying out a total of 6 years. This product has unique flexibility as the client can withdrawal the original single premium payment at any time throughout the life of the contract with no surrender charges. Clients could deposit $100,000, be covered by this two for one policy for a number of years, and then be able to rescind the contract and receive the $100,000 back without penalty.

Any of the above examples prevent the rapid depletion of assets built over the course of a lifetime. The important point is to have this discussion with your financial advisor, accountant, and your own peer group who have already chosen to complete this process. It is also advisable to work with a licensed agent to determine what coverage fits your needs and budget.

Catastrophic Disability – Small Cost, Big Benefit

Providing sufficient disability insurance for self-employed people can be challenging. This is especially true of the blue collar professionals who are in industries that are considered high risk to insurers.
We assist many clients who fit this category, and find that the traditional disability market does not adequately service them. This is true throughout the industry where certain vocations see higher potential for filing claims. Carriers who offer disability insurance want to know how much money you earn annually, how long you have been in the business, along with reviewing your current health status. This process takes a long time, and the end result is twofold. The amount of monthly benefit offered is not sufficient, and the premium is disproportionately high. One recent example was an offer of $4000 monthly benefit, for $6000 per year. Further, the premiums paid out for the policy are all post tax dollars.

Purchasing a catastrophic disability plan makes much more sense, especially for the trade professions noted above. This product does not care what you do, how much you earn, and medical underwriting is limited. Benefit qualifications are less likely as they are based upon not being able to perform certain activities of daily living. This results in affordable premiums, and rich monthly benefits. A $7500 benefit for an employee and his/her spouse in their 40′s quotes out at $1600 per year. Portions of the premium are tax deductible, while the benefit is tax free. Another advantage is that the monthly benefit, when triggered, comes directly to the beneficiary, and can be used for any expenses.

Our office can write these policies nationwide.