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Types of Long Term Care Insurance

There are two main types of Long Term Care Insurance, offering consumers more choices than ever. MAGA offers both types of LTCI, briefly outlined below.

 

Traditional Long Term Care Insurance Policies

Traditional Long Term Care Insurance policies have been around for more than 40 years. These stand-alone LTCI policies typically offer the most direct, affordable solution for funding long term care expenses.

Most policies reimburse the actual cost of care (up to policy limits) when insureds require assistance with two of six activities of daily living or because of cognitive impairment, including Alzheimer’s disease.

Traditional plans include the following components:

  • A monthly benefit (how much you want covered). – Benefits range from $1,500 to $12,000/month, depending on the insurance carrier.
  • A benefit period (how long you will receive benefits) – Benefit periods range from 2 to 6 years, again depending on the carrier. A few carriers offer longer benefit periods.
  • An elimination period (the number of days after a long term care event before you start receiving benefits) – These range from 0 to 365 days.
  • Optional benefits – There are a number of optional riders available, but one to consider is an inflation protection rider, which increases benefits over time to keep pace with the cost of living.

 

Asset-based Life/Annuity Plans with Long Term Care Insurance Riders

Asset-based plans are newer than standalone plans, but are rapidly growing in popularity.

They are also referred to as “hybrids” or “combo plans” because they combine two types of coverage—either life insurance or an annuity, paired with a Long Term Care Insurance rider—under one policy. The LTCI rider will include the same basic components as described above for traditional plans.

Obviously, asset-based Long Term Care Insurance plans only work for people who have assets to reallocate. However, for those that do, they offer a number of unique advantages, including:

  • If you don’t use your LTCI benefits, or only use a portion of them, your beneficiary will receive a life insurance or annuity benefit.
  • Premiums are guaranteed not to increase.
  • Premiums may be paid on a variety of schedules, from a single pay plan (one lump sum) through a 20 pay plan (20 annual payments), to lifetime payments.
  • Underwriting is less stringent.
  • You can replace an existing life insurance policy or annuity with an asset-based Long Term Care Insurance plan without incurring tax consequences, thanks to a tax code provision called a 1035 exchange.
  • With most plans, you can cash in your policy for any reason and get some or all of your initial premiums back.

 

For more about the advantages of asset-based life insurance plans with Long Term Care Insurance riders, see our published article .

If you are interested in learning more about traditional or asset-based Long Term Care Insurance plans, we are happy to help. Please contact us.  

 

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