Is A Combo Life/LTCI Plan A Good Deal?


The President and his cronies have done a masterful job of focusing the attention of Americans on the “health care crisis” of the uninsured and under-insured.  Thanks to “Obamacare,” every American will be able to pay their doctor, hospital and pharmacy bills.

Unfortunately, Obama has modified “Obamacare.”  In December of 2011, Mr. Obama unilaterally suspended all work on implementing Title VIII of the Patients Protection and Affordable Care Act.

Title VIII, aka C.L.A.S.S. was a plan to address the coming crisis of the need for Long Term Care coverage as Baby Boomers start aging.  The plan would not have helped people who are within 5 years of retirement but it would have benefited the second half of the Baby Boom generation.

Since this Administration decided to ignore a portion of the law that it so avidly lobbied for, Americans still must rely on the options that existed before “Obamacare.”  If you become dependent on someone else you must count on a friend or family member to take care of you or pay someone else with one of the three methods below.

  1. Medicaid
  2. Personal Assets
  3. Insurance

If you are not able to qualify for Medicaid because you were lucky enough to save something for retirement, you will need to “spend down” until you are able to meet your state’s Medicaid Asset Test.

Before Obamacare was passed in 2010, the Deficit Reduction Act of 2005 was the last piece of federal legislation that addressed the coming Long Term Care crisis.

In the past couple of years a great deal of ink has been used by both politicians and press to complain about the high costs of Long Term Care insurance.  For people who wait too long to get their insurance, those complaints are justified.

An individual who waits until he is 70 years of age to buy Long Term Care insurance can expect exorbitantly high premiums.  A person who waits until he is 86 will not be able to find LTCI regardless of what he is willing to pay.

The younger you are when you get LTCI, the less you will pay in premium.  If you want Long Term Care insurance, you should get it prior to age 70.

In order to make it an easy transition for my clients, I recommend getting at lease a minimal LTCI plan when your youngest child is no longer financially dependent on you.  At that time, the cost for a minimal LTCI is very similar to what you have been paying for life insurance.

If you no longer need the life insurance, replace it with Long Term Care insurance.  Rather than protecting your kids, you are buying insurance to protect yourself.

If you still need life insurance, in recent years, many Life insurance companies have developed a Long Term Care rider that can be added onto a permanent life insurance policy.  Policies with the Long Term Care rider are called, “combo” or “hybrid” policies.

Below are descriptions of the two basic types.  Your insurance agent can legitimately say that both of these riders will provide you with Long Term Care benefits.  However, their benefits are “triggered” by different events.

If you buy a life insurance plan expecting it to provide you with Long Term Care benefits, make certain to read the rider that is attached to your policy.  You need to know what constitutes a legitimate claim where you will be paid.  If you do not, you run the risk of having a Long Term Care claim denied.

ADB

One type of hybrid plan uses the Accelerated Death Benefit.  This type of plan allows you to use the death benefit of the plan while you are still alive.  It is only available if you are admitted to a nursing home or a doctor is willing to sign an affidavit that your illness is terminal and will result in your death within 12 months.

ADL

The second hybrid plan is closer to a true Long Term Care insurance policy.  It is more generous and comprehensive.  Benefits for either home health care or nursing home expenses are triggered if you are unable to perform two of the 6 basic Activities of Daily Living (A.D.L) without assistance.

  1. Dressing
  2. Personal Hygiene
  3. Eating
  4. Transferring (i.e. from bed to chair)
  5. Ambulation (Walking)
  6. Toileting

RECOMMENDATIONS

Every individual is unique.  They have unique needs.  After 25 years I have learned that it is dangerous to recommend the same thing to every client.  Before you do anything, I recommend that you sit down with your family to determine what your financial needs would be in the event you suffer from a loss of function.

  • Would your family be able to provide care for you?
  • Who would be responsible for what?
  • Would you be willing to move?
  • Would you qualify for Medicaid?
  • Would you be satisfied with Medicaid?
  • Would you be willing to spend your retirement savings?
  • Would you want a true Long Term Care insurance policy or would you be satisfied with a Life/LTCI combo?

The important thing is that you know what you want before you call an insurance agent whom you do not know.

If, however, you are not able or willing to have that conversation with your family, I will share with you my general recommendations.

  1. Buy LTCI sooner rather than later
  2. If your retirement savings is less than $ 30,000 you are already close enough to Medicaid qualification that there is no reason to buy a “Participating” plan.  If you have a need for life insurance, get one of the newer “hybrid” plans.
  3. If your retirement savings is greater than $ 30,000 but less than $750,000, you should buy a “Participating” plan, if one is available in your state.   That way your savings are protected from Medicaid’s Asset Test and Estate Recovery actions after both you and your spouse are deceased.
  4. If you have greater than $750,000, LTCI is a nice luxury to have but not necessary.  You can use either a true LTCI or a Life/LTCI “hybrid” if you want.

If you want a quote for a Life/LTCI “hybrid” you will need to contact me or a local insurance agent directly.  However, if all you want to do is compare prices for term life insurance, click the banner below.

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