Long-Term Care Insurance Alternatives

By: Gary R. Polk, CLTC – Certified in Long Term Care


 

Traditional Long-Term Care Policy

Reimbursement or Cash Benefit Plans

Can use annuity distributions to pay long-term care premiums

     on a tax advantaged basis (gains are taxed pro-rata not LIFO) - PPA 2006

Premiums are subject to possible future price increases.

 

Asset Based Long-Term Care Policy (Live, Die or Quit)

Transfer a one-time lump sum from existing assets; no further deposits    

     required – guaranteed. Provisions are similar to a traditional LTC policy.

Can be funded with a tax free exchange from existing life policy – PPA 2006

Pays benefits if never used for long-term care in the form of a tax free death benefit.

Guarantees 100% return of premium if cancelled (no surrender charges).

 

Life Insurance Policy with Long-Term Care Rider

Universal life insurance policy that provide access to the death benefit

     to be used to pay long-term care expenses; benefits received reduce the face  

     amount dollar for dollar. Premiums can be guaranteed never to increase.

Can be funded with a tax free exchange from an existing life insurance policy.

     It is available on a reimbursement or indemnity basis.

 

Annuity with Long-Term Care Rider

Fixed annuity that provides leverage to pay for long-term care expenses

Can be exchanged (tax free) from existing annuities – PPA 2006

Converts tax deferred income to tax free income if used to pay for qualified

     long-term care expenses.

Easier underwriting when more significant medical issues are of concern.

 

     PPA 2006 – Pension Protection Act of 2006, effective Jan. 1st, 2010