by Richard Schlueter, Vice President – Insurance Services, Wealth Enhancement Group

Traditional long-term care insurance continues to get my vote as the best option for shifting the risk of a long-term care event. With that said I often hear some of the following responses when discussing long-term care protection with a prospective buyer.

• It’s too expense and won’t fit within my budget
  
• I won’t ever use it and so I consider it a waste of money
  
• I have enough money and so I’m going to self-insure
  

Typically after discussing any one or more of these responses in detail the client and I are able to overcome their initial objectives. However, there are times when I am swayed in favor of their argument. For any number of reasons traditional long-term care insurance just isn’t going to work.
 
That’s when I turn to a discussion about linked benefit solutions, typically in the form of an annuity or life insurance policy. Linked benefit products are also commonly referred to as asset based long-term care. Stay tuned for a future article about linked benefit annuities. In this article I’m going to focus briefly on life insurance as a linked benefit solution.
 
For example, a married couple makes a single deposit into a life insurance policy of $50,000. Based on their age and health the single deposit purchases $100,000 of death benefit that will be paid tax-free at the second death. (Please note that these numbers are purely hypothetical and intended for illustrative purposes only.)

We’ll assume the cash value is guaranteed never to dip below $50,000 unless the policy is used for long-term care benefits or a distribution is taken from the policy. The policy purchases a monthly long term care benefit of $2,000 for a total period of 50 months. Either party can use the benefits or share them.
 
Benefits:
 
In this example, if the policy is never used for long-term care and no loans are taken from the cash value, the beneficiaries of the estate of the last survivor will receive $100,000 tax-free.
If long-term care is needed the benefits are a factor of the death benefit, not the single premium.   If you need to access the cash value you can do so, just like any cash value life insurance policy. Death benefit and long-term care benefits will be reduced.

If you ever want to walk away from the policy you can do so with at least your original investment in hand. This would only be the case if you hadn’t previously taken distributions from the policy or used the policy for long-term care benefits.

The money back guarantee is provided by a return of premium rider, which may be included at issue on a single premium policy. Additional costs for riders will be deducted from the policy account value. All guarantees are based on the claims-paying ability of the issuing insurance company.
 
The cost of health care is rising quickly and the likelihood that you will need care is greater than you think. It’s important to consider all your options when it comes to purchasing long-term care protection.
 
If you would like to learn more or to evaluate a linked benefit product for yourself please contact Wealth Enhancement Group at 800-492-1222.