Saying Goodbye to “Use It or Lose It” Long-Term Care Insurance

We are seeing two things happening with long‐term care: the costs of care keep going up and, with them, so do the premiums for long-term care insurance. Did you know that your premiums can rise even when you’ve already got a policy in force?

And what if you never even need to use the policy? For many people, long-term care insurance seems like a potential waste of money.

So what’s one to do? The answer to this dilemma may lie in what’s known as a linked-benefit insurance policy.

This hybrid cash-value life insurance policy allows you to access the policy’s death benefit in order to pay for your long-term care needs. Normally, of course, a death benefit is paid to your heirs after you’re gone; but this way, you’re able to use a portion (or all) of that benefit on yourself—before you die—to help with your long-term care expenses.

Here’s a quick hypothetical example of how a linked-benefit insurance policy might work. You’d put, let’s say, a $50,000 deposit in an account with a life insurance company. Assuming you leave that $50,000 alone and don’t take it back, if you die without ever needing any long-term care for yourself, your heirs would receive, in this example, maybe $90,000 tax-free on that policy’s death benefit. So you turned $50,000 into $90,000 immediately upon your death for your heirs.

But if you do need some kind of long-term care, the policy takes a portion of that death benefit and reimburses you for your care-related expenses. If you only use a portion of the death benefit, the remainder is paid to your heirs after you’re gone.

And here’s where it really gets interesting: if you wind up needing more than what the death benefit provides to cover your long-term care needs, the policy would keep paying for your care up to as much as two or three times the death benefit amount—all tax-free.

Of course, the amount of the death benefit and the long-term care benefit will vary, based on your initial deposit, your age, your insurability, and a few other factors. But this is the general idea of how it works.

Nobody wants to have their retirement savings decimated by the cost of long-term care. Yet this is exactly what happens to many people who aren’t prepared for what might lie ahead. If you want more details on how a linked-benefit insurance policy might work for you, reach out to an advisor or give us a call at (800) 644-1150.

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Information presented should not be considered specific tax, legal, or investment advice. You should always seek counsel of the appropriate advisor prior to making any investment decision. All investments are subject to risk including the loss of principal. This material was gathered from sources believed to be reliable, however, its accuracy cannot be guaranteed.

Long Term Care coverage policies and provisions may not be available in all states. Approval may be subject to the terms and conditions of the insurance company. Insurance product guarantees are subject to the claims-paying ability of the issuing insurance company, and are subject to their terms and conditions.

Raymond J. Lucia Jr. is chairman of Lucia Capital Group, a registered investment advisor and CEO of its affiliated broker-dealer, Lucia Securities, LLC, member FINRA/SIPC. Advisory services offered through Lucia Capital Group. Securities offered through Lucia Securities, LLC. Registration with the SEC does not imply a certain level of skill or training.

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