A basic problem for clients looking for long-term care insurance today is that they simply may not be able to find it. Major carriers have pulled out of the market in the last year, and the policies that remain can be prohibitively expensive and contain strict qualification requirements.
Fortunately, the product market is evolving so that a relatively new method of securing tax-preferred long-term care benefits has emerged. Hybrid annuity products that combine the estate and income planning features of an annuity with the protection of long-term care insurance are becoming increasingly popular among clients looking for replacement insurance. Because the available long-term care benefits under these contracts are based on a percentage of the annuity premium value and often offer optional inflation coverage, clients may need to triple their initial investment to ensure long-term care needs are met, but with the added bonus that those funds are not lost if care is never required.
Further, while a long-term care policy provides benefits only if the client eventually does require long-term care, the value of the annuity with long-term care benefits may be withdrawn by the client when the contract reaches maturity or passed on to the client’s heirs in the event that care is not required. Conversely, the client’s investment in a traditional policy is lost if he does not require care.
Many annuity contracts with long-term care riders will provide coverage with significantly fewer qualification requirements than a traditional policy, providing an attractive alternative for clients with preexisting conditions who may be unable to qualify for traditional policies.
Originally published on National Underwriter Advanced Markets. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.