Asset Based Long Term Care Insurance
Asset Based Long Term Care Insurance is the future of the industry. Now with over 1.4 million people in nursing homes in the United States, and recent studies showing 10 out of every 14 people (70%) are going to need some form of long term care in the the future. It’s now more important than ever, to understand you options and understand the future.
Yet despite these needs, we are seeing less and less people pursue long term care insurance. So why is this?
Well everyone one has a reason for not purchasing a long term care policy, but here are two we hear a lot:
- The premiums are not guaranteed.
- Not getting any money back if the coverage is never needed.
As time went on, the insurance companies began to see some of the shortcomings of their policies and quickly began to address them, by revolutionizing the long term care market. It took a little time but that is when the new plans started to come to the marketplace and they were called asset based term care insurance policies.
These products have shifted the meaning of what it is to have long term care insurance.
What’s the Difference Between Asset Based and Conventional Long-Term Care Insurance?
So how is asset based long term care insurance different from conventional policies? Let’s take a look
Conventional Long Term Care Insurance Premiums are paid each year and as long as they are paid and up to date the coverage is provided if long term care is ever needed. However what has happened over the last 20 or so years is the premiums are not guaranteed and are subject to change at any given time and that has been happening more often than it should.
So if a company is seeing their claims ratios being more than they anticipated then they can and will raise your premium. We will see clients pay an increase or two or even decrease the coverage to avoid an increase, but at some point a decision has to be made if you can still keep the coverage. At some point you have to decide if keeping this conventional plan is an option for your estate security.
With Asset Based Long Term Care Insurance plans, they put a “fence” around the rising cost of long term care insurance by providing guaranteed premiums along with guaranteed benefits. It is generally stated as a more efficient way to self insure, by moving assets from one pocket to the other pocket. You can secure your retirement stool and estate from the effect of long term care costs. Your money remains yours, growing at a guaranteed interest rate and that money can be withdrawn tax-free for long term care insurance needs
What are some ways I can pay for Asset Based Long Term Care Insurance?
So Fortunately, we have a lot of different options available for you.
We can use qualified money (IRA’s, Pension Plans, 401(K)’s, etc..if you are over 59.5 years of age), single premium payments, annual installments of 5-20 years, and any qualified or non-qualified annuities or cash values of permanent life insurance. The bottom line being, there are many different options available for everyone, which makes it easier than ever to fund your long term care insurance.
Companies such as State Life One America Asset Care, Lincoln MoneyGuard, MassMutual CareChoice One and others have all released similar asset based products. Each these have their pros and cons, which we will go over in the next section.
So What Are Some Common Asset Based Long Term Care Policies?
One America Asset Care
State Life One America offers a diverse range of quality products. However their Asset Care(1-4) line is our favorite.
One America Asset Care is a Life Insurance and Long Term Care Hybrid Policy. This policy calculates out a “death benefit” which is your long term care benefit pool. If the time ever comes where you need to utilize the money. You are then able to do a tax free withdrawal from that benefit amount to fund your long term care insurance needs.
So what if that asset based long term care benefit pool depletes?
Well State Life One America Plan, they found a way to give the policy two options to extend the LTC benefit period. They do this through their Continuation of Benefits Rider. Which offers you two options:
- Doubling the death benefits, so it gives you an additional 50 months of long term care benefit pay out
- Unlimited benefit pool. With this rider, you will have an unlimited amount of benefits to pull from.
Both of these riders will require additional premium.
Here is a list of the different funding options State Life offers:
One America Asset Care is a Single Premium
One America Asset Care II is Non-Qualified Annuity or Life Insurance 1035 exchange.
One America Asset Care III is Qualified Money Transfer- IRA Rollover.
One America Asset Care IV is Annual Premium Installments of 10-20 years.
MassMutual CareChoice One
The MassMutual CareChoice One is a different type of asset based long term care policy. Like other plans when your purchase the policy there is a set monthly long term care benefit amount that has a minimum of 48 months of benefits. Unlike other plans this plan is built on a whole life chassis.
Which means it receives dividends so as dividends are paid each year the cash surrender value and the death benefit goes up. As the dividends accumulate over the years, at some point the monthly benefit could go beyond the 48 months if it ever needed. Because of the increasing cash values and increasing death benefit there is the potential for good long term accumulation.
So now what do I do next?
Well If your not sure on which product is best suited to your needs, feel free to Contact Us. Where we will analyze your needs and find something that is suited specifically to you.
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