If you are considering buying a linked-benefit long-term care policy, here are a few key important things you should know. We'll discuss them and more on this webpage.
Costs Differ: You could pay more each year for virtually identical coverage.
Benefits Differ: When you need care what's covered and what isn't is determined by your policy contract.
Discounts Differ: Small but very important details when you apply can save you money.
Future Payment Methods Differ: Some policies are "indemnity" (paying a cash benefit) - others are "reimbursement"(reimburse only for actual costs). A potentially important difference come claim time.
Acceptable Health Conditions Differ: If you have some existing health issues or take multiple prescriptions, one insurance company may decline your application. Another may find the conditions acceptable.
Are You Paying $85,000 or Paying $5,000? A single premium versus yearly premiums ... what's in your best interest?
FINALLY! Some "linked-benefit" (life insurance) policies being sold today DON'T HAVE qualifying "long-term care" riders. They have "chronic illness riders" and that can make an important difference when you expect to get paid for care. We'll explain what to look for so you can tell the difference.
There can be significant differences between the growing number of linked-benefit long-term care policies available today. To understand the differences, it pays to work with a knowledgeable "specialist" who can compare multiple policies and help you get the best coverage for the best price.
To Speak With a Linked-Benefit LTC Specialist
Call the American Association for Long-Term Care Insurance
818-597-3227
There is NO COST and NO OBLIGATION to buy from them.
Linked-Benefit Long-Term Care Insurance Information Center
Click on the links below to 'jump' to particular topic.
- #1. How To Get The Best Linked-Benefit LTC Policy For The Best Cost
- #2. Cost Differences: Linked-Benefit Long-Term Care (2020)
- #3. Key Benefit Differences: Linked-Benefit Long-Term Care
- #4. You Should Compare Traditional LTC versus Linked-Benefit LTC
- #5. Discounts Available for Linked-Benefit Long-Term Care Insurance?
- #6. Single Premium Linked-Benefit Long-Term Care Insurance
- #7. Long-Term Care versus Chronic Illness Riders
Tip #1: How To Get The Best Linked-Benefit LTC Policy For The Best Cost
Chances are you are researching linked-benefit long-term care because your financial advisor or stock broker recommended one. You want to know if their recommendation is good (for you). It may be. But very often you could do better. At worst, you may be buying something you don't understand and won't realize the mistake until 10+ years from now when you ultimately need claim benefits.
Today, long-term care insurance has become a rather specialized industry. There are many nuances between policies, and we're not just talking about cost differences. As a result, very few financial advisors (or stock brokers) have that depth of knowledge or experience. Most are familiar with and offer their clients one (maybe two) long-term care solutions. And, unlike other insurance products, where you can switch insurance companies or coverage from time to time, it almost never pays to switch long-term care coverage. So you need to make the right choice the first time.
And, unless you received a printed brochure or proposal and read all the footnotes and disclaimers, you probably aren't sure if the coverage meets IRS regulations 7702B (long-term care) or IRS regulations 101(g) (chronic illness rider). Both are often verbally promoted as 'long-term care benefits' BUT they can be quite different come claim time.
The various all-important differences impact what you'll pay ... and how you'll ultimately receive benefits. The Association believes it's important to work with someone who specializes in long-term care insurance.
Here are three questions to help you know if you are working with a specialist.
Question 1: "Do you sell BOTH traditional and linked-benefit long-term care insurance?" Read Tip #4 below.
Question 2:
Question 3: "Have you ever had a client with long-term care insurance actually go on claim?"
The Association advocates for working with the professional who gives you the best information and helps you secure the insurance coverage that meets your budget and future needs. You ONLY buy long-term care coverage ONCE ... so you'll want to do it right.
Tip #2: Cost Differences for Linked-Benefit Long-Term Care (2020)
There can be significant differences in what you'll pay for virtually identical linked-benefit long-term care policies. In February, 2020 the Association compared rates for two of the leading policies.
Comparing Two Linked-Benefit Policies With Long-Term Care Riders
Monthly Benefit = $5,000. 3 Year Benefits. $180,000 in available LTC Benefits
Company A - Single MALE - Age 55 POLICY COST: $3,625 per-year
Company B - Single MALE - Age 55 POLICY COST: $5,010 per-year
Company A - Single FEMALE - Age 55 POLICY COST: $3,400 per-year
Company B - Single FEMALE - Age 55 POLICY COST: $4,550 per-year
Comparing Two Linked-Benefit Policies With Long-Term Care Riders + 3% Growth Option
Monthly Benefit = $5,000. 3 Year Benefits. Initial LTC benefit $180,000. LTC benefit at age 90 $505,000
Company A - Single MALE - Age 55 POLICY COST: $5,278 per-year
Company B - Single MALE - Age 55 POLICY COST: $6,710 per-year
Company A - Single FEMALE - Age 55 POLICY COST: $5,500 per-year
Company B - Single FEMALE - Age 55 POLICY COST: $7,010 per-year
Tip #3: Understand Some of the Key Benefit Differences: Linked-Benefit Long-Term Care
When you buy long-term care coverage, you expect the insurance company to pay when you need care. Maybe you even took the time to read the pretty brochure or the online website information.
Everything is determined by the CONTRACT LANGUAGE written by teams of insurance company lawyers. And, you don't get your contract until AFTER you apply, are accepted and typically pay. And, chances are, at that time you do what we all do; FILE IT AWAY UNREAD.
WHICH IS WHY we believe it is so important to work with a knowledgeable long-term care insurance specialist who really understands the minute contract details that matter so much come claim time.
Here Are Some of the Important Benefit Differences
AALTCI comparison of six (6) leading linked-benefit insurers (A, B, C, D, E, F). February, 2020 Provisions subject to change.
IN-HOME CARE ELIMINATION PERIOD LTC BENEFIT PAYMENT TYPE LTC BENEFIT COVERAGE DURATION MAXIMUM LONG-TERM CARE MONTHLY BENEFIT AMOUNT INTERNATIONAL COVERAGE INFORMAL CARE HOME MODIFICATION BENEFIT TERMINAL ILLNESS BENEFIT TAX DEDUCTIBLE PREMIUMS
Company B: 0 Days Company E: Up to 90 Days
Company A: Cash (indemnity) Company B: Reimbursement (receipts)
Company E: Lifetime (unlimited) Company D: Maximum of 5 years
Company F: $50,000 Most Others: $10-$12,000
Company D: 100% (No restrictions) Company A: 50%
Company A: Yes (No restrictions) Company E: No
Company E: Up to 2x Monthly Maxiumum Company A: $5,000 Initial
Company C: Not to Exceed $250,000 Company E: None
Only 1 linked-benefit company.
Traditional LTC Insurance premiums today almost always will qualify for tax deductibility rules.
This can be a significant benefit at older ages (70 or older).
Tip #4: Why You Should Compare Traditional LTC with Linked-Benefit LTC
Many people are willing to pay more for a linked-benefit policy because they like the fact that if they NEVER need long-term care, some benefit goes to their heirs (it is after all a life insurance policy that you are buying).
But, it may pay to at least compare costs for a traditional long-term care insurance policy.
Comparing Traditional Long-Term Care Insurance to a Linked-Benefit Policy With Long-Term Care Rider
Monthly Benefit = $5,000. 3 Year Benefits. LTC benefit $180,000.
Traditional LTCi - Single MALE - Age 55 POLICY COST: $ 875 per-year
Linked-Benefit LTC - Single MALE - Age 55 POLICY COST: $3,625 per-year
Traditional LTCi - Single FEMALE - Age 55 POLICY COST: $1,350 per-year
Linked-Benefit LTC - Single FEMALE - Age 55 POLICY COST: $3,400 per-year
Comparing Traditional Long-Term Care Insurance to a Linked-Benefit Policy With Long-Term Care Rider (With 3% Growth)
Monthly Benefit = $5,000. 3 Year Benefits. LTC benefit $180,000. At age 90 benefits = $505,000
Traditional LTCi - Single MALE - Age 55 POLICY COST: $1,710 per-year
Linked-Benefit LTC - Single MALE - Age 55 POLICY COST: $5,278 per-year
Traditional LTCi - Single FEMALE - Age 55 POLICY COST: $2,750 per-year
Linked-Benefit LTC - Single FEMALE - Age 55 POLICY COST: $5,500 per-year
Tip #5: What Discounts Are Available for Linked-Benefit Long-Term Care Insurance?
You may be eligible for a couples discount (not available with all linked-benefit companies).
Available couples discounts can be as high as 10%.
Tip #6: Single Premium Linked-Benefit Long-Term Care Insurance. Is it Right For You?
At one time, linked-benefit policies required what's referred to as a 'single premium' payment. Typically the minimum amount was $50,000.
BUT THAT'S NO LONGER TRUE and companies today offer a variety of payment options. From yearly to policies that are paid up after a period of years.
When you pay a single premium, you don't have to think about future payments. But you've also tied up all those funds. Don't overlook the fact that insurance commissions are based on premiums paid.
If a single premium payment works for you ... GREAT. But, be aware that today you have options that hopefully were explained to you.
Tip #7: Long-Term Care versus Chronic Illness Riders
Linked-benefit policies are basically life insurance (or annuity) policies with an added rider. The Internal Revenue Service has approved under IRC Section 7702B (the Internal Revenue Code concerning the treatment of long-term care) provisions designed to help pay for the costs of long-term care services.
Today, a number of life insurance policies do not meet the 7702B provisions. They meet IRS Section 101(g) provisions (chronic illness riders). Both have a place and benefits but understanding the difference is important.
WHY DOES IT MATTER? Because you buy this policy with the expectation of being paid.
Qualifying claims paid under Section 7702B (long-term care qualifying policies) can be either "temporary" or "permanent". For example, you may have a stroke and need care for a year with the expectation you will eventually be able to not need care.
Chronic illness riders under Sectior 101(g) are ONLY for "permanent" qualifying events (meaning it is expected to last for the rest of your life until death). An 80-year old who suffers a stroke likely would not get benefits from a chronic illness rider.
BEFORE YOU BUY, it is vitally important that you ask whether your policy meets Section 7702 or Section 101(g) and read the material carefully because verbal explanations are NOT VALID when it comes to contesting insurance matters.
TIP: Look for the words Long-Term Care in the printed material because life insurance policies that meet Section 101(g) provisions legally can not describe themselves as long-term care coverage.