NOTE: This article is written from a purely objective perspective, offering not only valuable information but also unbiased solutions, recommendations, carriers, and policies. As opposed to the majority of other sites that promote ONLY carriers and policies they represent. You can trust with 100% confidence the information presented in this article as the BEST OPTIONS for each category of long term care.
“There must be some serious problems in the Long Term Care insurance market for so many people to be asking me about it. I never took any considerable amount of time to really understand the problem (mostly because I did not know it’s a problem) – THEN – after a little bit of research it started to make a LOT MORE SENSE –> THERE IS A LONG TERM CARE PROBLEM!”
Why is long term care important (what people worry about it)? People have shared with me many of their fears and concerns about long term care, here are some of the primary fears people have shared with me about long term care.
I reached out to one of my internal wholesalers (Jeff) and asked for some guidance on becoming certified in long term care. Surprisingly he did not recommend I pursue the certification – SO – I asked; WHY?
He said something along these lines;
Many carriers are abandoning that product. There are very few carriers remaining and it’s much more expensive now than it used to be. Furthermore, the public is losing confidence in the product because of what they perceive as abusive rate increases. There are a variety of hybrid and alternatives solutions available.
AFTER lots of research into the state of the market, after speaking with countless professionals (agents, brokers, analysts, advisors, wholesalers), here is a summary of what the BEST OPTIONS look like for long term care in 2019 and beyond.
A few years ago some REALLY SMART PEOPLE at a few large life insurance companies took a look at the gap in the marketplace for Long Term Care and said; LET’S DO SOMETHING ABOUT THIS – THERE IS A NEED FOR LONG TERM CARE, WHAT CAN WE DO?
They came up with the concept of a Universal Life chassis (fancy word for the engine of a given type of policy, kind of like an engine in a car) that combines ONLY long term care and a death benefit (no cash value accumulation). Looking back, these types of policies are a stroke of genius – they solve the long term care issue while reducing the risk for both customer and carrier!
WHO SHOULD CONSIDER HYBRID LONG TERM CARE? These policies will require more upfront funding of a policy than other solutions, but once your policy is paid up, your Long Term Care needs are solved for life. These are ideal options for people with a disposable income or higher-earning professionals (i.e. doctors, lawyers, entrepreneurs, family-owned businesses, executive and middle management, etc.) The perfect age for purchasing a hybrid policy is between 50-65 years old (although people ages 40-75 will qualify).
You can search Google HIGH AND LOW for these products, it’s like Google is purposely hiding these from you! Below are some providers of Hybrid Long Term Care Universal Life solutions – THESE ARE SOLID POLICIES, AND WITH THE CERTAINTY OF MORE COMING, YOU WILL HAVE EVEN BETTER OPTIONS IN THE FUTURE.
Okay, TRUTH TIME, the Hybrid Long Term Care Universal Life options may be a little pricey for the average person, however, this option (Living Benefits) is not only robust but it’s also very cost-effective. It’s also a little more complex, at least on the surface.
WHO SHOULD CONSIDER LIVING BENEFITS IN A LIFE POLICY? Young and middle-aged professionals with modest incomes, typically ages 20-45 although healthy people up to age 60 certainly may consider this option. These are GREAT cost-effective solutions for asset protection to provide peace-of-mind for family breadwinners, family caretakers (stay at home mother/father), homeowners or anyone with a need to protect family wealth and assets. Not to limit who should take advantage of Living Benefits, basically, ANYONE with ANY life insurance or death benefit need should look thoroughly into Living Benefits. You may not feel you “need” these benefits (i.e. too young to worry about long term care), but many policies include Living Benefits (at no additional cost) or at minimal additional cost.
So let’s break it down. Embedded Living Benefits are benefits within a policy that will pay a portion of the death benefit while you are still alive. In some policies, you may claim living benefits even during non-terminal conditions, in so much act as these can act as long-term disability policies.
LIVING BENEFITS, WHAT ARE THEY?Living benefits are packaged into the majority of life insurance policies nowadays. Each policy with a blend or a mix of the three types. NOTE: Chronic, Critical and Terminal verbiage may vary from carrier-to-carrier -> PLEASE -> ask your advisor or agent about each policy independently, THIS IS IMPORTANT.ACCELERATED DEATH BENEFITThis is the general terminology for ALL Living Benefits. It provides an accelerated death benefit if the insured faces a serious medical hardship such as a critical, chronic or terminal illness. Every policy needs to be evaluated independently for WHICH benefits they include.CHRONIC ILLNESSA chronic illness rider is a life insurance option that gives you a way to tap into life insurance benefits while still alive if you are diagnosed with a qualifying chronic illness. This is considered an accelerated death benefit rider and is sometimes added to policies at no extra cost. Some policies use the ADL test (activities of daily living) to trigger chronic illnesses, i.e. when someone cannot perform at least 2 of the six ADL's it will trigger Chronic Illness benefits.TERMINAL ILLNESSA terminal illness insurance rider is an addition to your standard life insurance policy which will provide you with additional financial support if you are diagnosed with a terminal illness, most carriers define terminal as an expectation of only 12-24 month to live.CRITICAL ILLNESSA critical illness rider makes living benefits payable to the insured for medical expenses while still alive. Critical illness riders are usually triggered when you have a critical illness such as a heart attack, cancer and many more (check your carriers list of critical illness triggers, one carrier we know of has 16 conditions that trigger their critical illness rider). Some carriers may also use the ADL test as a trigger. Critical Illness benefits work very similar to disability.
Below are two EXCELLENT choices for term life policies that have Living Benefits (including critical illness) riders built-in to their policies.
PLEASE NOTE, the above carriers and policies are TERM LIFE, it’s NOT permanent insurance and if you outlive the term, you will NOT have a benefit. Also, because it’s a term policy, you may want to consider adding some additional coverage (10-20%) to account for Living Benefits and long term care consuming the death benefit. The cost of an additional 10-20% of coverage is WAY LESS EXPENSIVE than purchasing a stand-alone.
IF you are looking for term insurance that includes benefits that will take care of your long term care, consult with your advisor for a complete needs analysis to make sure it’s right for you.
Fewer whole life (permanent, or CVL/Cash-Value-Life) policies are available that offer comprehensive built-in Living Benefits (Long term care or critical coverage). One of the reasons why these are hard to find built-in Living Benefits in a policy is the assumption that as a cash value policy matures, there will be enough cash value accumulation within the policy to independently fund long term care.
Below are a few of the commonly agreed upon BEST OPTIONS for whole life (permanent) policies that offer robust Living Benefits (including critical coverage).
This strategy and these riders are great for “gap protection” that will help you sleep at night if you do not have enough capital, assets or life insurance built up to cover your long term care needs.
An example of “gap protection”, in this context, could be adding a rider to a whole life or IUL policy during the early years to compensate for the lower cash value and/or benefits in the early years of a permanent policy.
WHO SHOULD CONSIDER LIFE POLICY RIDERS? Anyone that wants to tailor specific long term care needs within a life policy for specific lifestyle and budget requirements. Riders are VERY flexible and allow you to adjust levels of coverage and terms to meet your exact needs at the appropriate time in your life.
Definitely consult with an advisor before looking further into this option. Depending on your goals (death benefit, cash value accumulation, living benefits, long term care) attaching a long term care rider can have a profound negative impact on other goals (i.e. sacrificing retirement funding for long term care needs.)
Below is a list of carriers that are widely considered THE BEST WHOLE LIFE POLICIES in the marketplace. Each of these policies come with over 100+ years of producing positive returns (dividends) AND include powerful long term care provisions, riders, and solutions.
Below is a list of carriers that are widely considered THE BEST IUL (INDEXED UNIVERSAL LIFE) CARRIERS AND POLICIES WITH LONG TERM CARE RIDERS in the marketplace.
Please do note, there is a HUGE different between “The Best IUL” vs. “The Best IUL with Long Term Care Rider“. The list below are our recommendations for best IUL’s that include a long term care rider.
IUL policies do not come with the 100+ year history that a whole life policy does, but they do offer some unique and powerful benefits above and beyond whole life.
Whole life or IUL is a matter of preference and needs, definitely consult with your advisor to find what is best for you.
There are also a host of carriers and policies that have enhanced and robust critical illness riders.
Annuity long term care riders are supplemental riders attached to an annuity contract that accounts for your long term care needs. Many fixed index annuities include a long term care rider and for the right person at the right time is an ideal solution.
WHO SHOULD CONSIDER LIVING BENEFITS IN AN ANNUITY? Anyone above, say, 60 that has a desire or need to combine PRINCIPAL PROTECTION, retirement income and/or would like to mitigate the cost of long term care. You might even make a case for someone that is looking for long term care – BUT – also has some principal, cash or capital that is laying around that you may want to protect, this person can solve their primary need of long term care with the secondary benefit of principal protection and/or retirement income.
As opposed to a life policy where there is potentially strict underwriting (i,.e. will not accept certain health conditions) and the high cost of insurance above age 60, annuity long term care riders reduce the underwriting requirements AND you will not have to worry about the high cost of life insurance.
What are some of the best annuity-long-term-care combinations and products in the marketplace?
Again, we recommend consulting with a trusted advisor to perform a complete needs analysis to find an annuity that best fits your needs.
This is a dying-breed, as mentioned at the beginning of this article, both in terms of demand from consumers (because of alternative solutions) and in terms of supply by carriers (because of rising costs and other factors).
WHO SHOULD CONSIDER TRADITIONAL LONG TERM CARE? Anyone not covered in 1-4 above! Basically, stand-alone long term care is the option of last resort for someone that has no other option.
Stand-alone long-term care insurance has plummeted in popularity since the market’s peak in 2002, when 750,000 consumers bought policies. In 2017 only 89,000 consumers bought policies – a whopping 88% drop.
The premiums that insurers charged on those old policies turned out to be too low, and newer policies that more accurately reflected long-term care risks were so much more expensive than the pool of consumers who could afford them shrank. In addition, long-term care insurance can be difficult to understand. Few people are familiar with it and how it works.
The net result is a near-collapse of the long term care market, driven by rising costs and eroded consumer confidence in stand-alone long term care products.
This does not mean there are NO options available.
There are still some options available. Be very careful in your research, all long term care providers are under a lot of financial distress. Hence, you will not be able to find a guarantee to lock in your rates, they WILL increase. Below are some of the stand-alone options remaining for long term care.
NOTE 1: Genworth was spun off by GE in the 2000s and there are rumors that some bad times are ahead for Genworth.
I included Genworth and Banker’s Life above because I personally know many people that have purchased these policies. It is not necessarily a recommendation, rather an acknowledgment you can still purchase a policy.
Long term care is a HUGE concern for people, the older we get the bigger the concern and more FEAR it provokes within.
We wrote this article to help you best understand your options for long term care, at least as the market exists in the fall of 2019.
We KNOW it’s a problem because of the large number of inquiries and the uncertainty people have, the uncertainty that directly leads to fear.
We would certainly appreciate an opportunity to discuss your long term needs or answer any questions you may have.
You may also download our eBook below -> [eBook: LONG TERM CARE IN 2019 AND BEYOND].