Hi, I’m Collin Terry, Benefits Planner for Krause Financial Services. Today, I’m going to give you an introduction to Traditional Long-Term Care Insurance.
Purchasing Long-Term Care Insurance, or LTCI, is the most common form of preplanning. Today, we’re going to look specifically at Traditional LTCI.
Traditional Long-Term Care Insurance functions like a typical insurance policy – the owner pays a premium in exchange for future benefits. There is no cash value, and the owner will only receive benefits in the event of a qualifying long-term care stay.
Due to a qualifying event, premiums are based on the age and health of the applicant and on the benefits they are seeking. A higher amount of coverage for a longer period of time will cost more than a lower amount of coverage for a shorter period of time.
Some Traditional LTCI products may create uneasiness for your client in that they may lose their premium amount if they never need long-term care benefits. However, there are certain riders, like the Return of Premium rider that provides a death benefit to the owner’s beneficiaries for any premiums paid in and not used. Then your client can feel secure in their decision to purchase a policy.
Traditional LTCI can be structured in any way the client desires, and the different options will affect the total premium amount owed. There are three different premium plans available.
The first is a Single Pay policy. A Single Pay policy means the owner will make one, single premium payment to create the policy. Next would be a 10-Pay option. The 10-Pay option allows the owner to make premium payments over the course of 10 years. And lastly, a Lifetime Pay, which allows the owner to make payments over the remainder of their lifetime.
The client will also need to determine the elimination period that is best suited for them. The elimination period is the period of time from which the owner first makes a claim to when the insurance company will actually begin providing benefits. Options include zero, 30, 60, or 90 days.
The benefit options, which determine the daily benefit amount they will receive while in long-term care, will range from $50 to $300. Additionally, inflation riders are available on the claim, which increases the amount of daily benefit over time.
The owner will also need to choose their benefit period, or the amount of time they’ll receive benefits while in care. Initial options include periods of two or three years. However, policy riders are also available, which extend the benefit to four, five, or six years, or even the lifetime of the owner.
Other riders include the Return of Premium Rider, which I mentioned earlier, and a Cash Surrender option, which allows the owner to receive 80% of their premiums back while they’re still living.
A Traditional LTCI policy is a good choice for your client if they are between 40 and 80, in good health, and have the funds available to purchase the policy.
In some cases, this policy can be used in crisis Medicaid planning. If you have a married couple where one spouse is in need of immediate care but the other is still in good health, you can have the community spouse purchase the LTCI policy.
Not only will this help the healthy spouse in the future if receiving care, but the policy will also have no cash value. This way, the couple can spend down excess countable assets on the LTCI policy while also working towards Medicaid eligibility for the spouse that’s in need of immediate care.
If you’d like to learn more about your client’s options when working towards Medicaid eligibility, please contact our office at 855-552-5893 to speak with a Benefits Planner.
I’m Collin Terry, and thanks for watching.