Will You Need Long-Term Care Insurance?

When it comes to long-term care insurance, there are four major solutions to consider, Rona Loshak, a founding partner of Karp Loshak Long-Term Care Insurance Solutions Brokerage, said in a recent interview with TheStreet’s Retirement Daily.

According to Loshak, there are stand-alone plans; state partnership plans; hybrid plans, and annuities and life insurance with long-term care or chronic illness riders. Watch Evaluating the Four Major Long-term Care Planning Solutions in the Marketplace.

Before deciding on which solution is best, however, Loshak recommends getting a handle on your health. Carriers look at different health conditions and some carriers may deny coverage for certain health conditions that others may approve. “Many conditions are insurable,” said Loshak, who spoke recently at the annual Engage conference for the American Institute of Certified Public Accountants. That’s why she recommends working with a specialist who works with every carrier.

Next, evaluate your lifestyle needs. For instance, do you need a death benefit or a guaranteed minimum plan?

Once you have a handle on your health and lifestyle needs, you can evaluate the four major types of plan designs.

Stand-Alone/Traditional Long-Term Care

This is the plan where you pay premiums until you claim the benefit. According to Loshak, the market has stabilized over the years and is now dominated by mutual insurance carriers with good ratings.

“Those offer the biggest bang for the buck, and they have a lot of flexibility,” she noted.

There’s also something called a shared care plan which allows a married couple to take out separate plans that have an option allowing each spouse to become a "rider" on their partner's plan. This, said Loshak, can be a good option for “for a healthy, married couple.”

There are policy features to consider such as inflation protection and nonforfeiture benefits. “There are different ways to design these plans that would fit into somebody's budget,” said Loshak.

Another option, for some, to consider is the Long-Term Care Partnership Program. That’s a joint federal-state policy initiative to promote the purchase of private long term care insurance, according to the American Association for Long-term Care Insurance. That program is intended to expand access to private long term care insurance policy to pay for long-term care services.

Hybrid or Asset-Based Plans

A hybrid or asset-based solution is one that’s built on a life insurance chassis.

According to Loshak, it works like this: At the time of your long-term care claim, you first file against the death benefit. And then, once the death benefit has been fully exhausted, the policy will continue to pay an extended benefit under this optional rider.

“A lot of people like these plans because they give you the most long-term care benefit,” she said.

Life Insurance With a Rider

With the long-term care insurance/chronic illness rider option, what’s important to know is that there are different riders, the most common of which is the 7702b. Under that rider, there are standard federal triggers and guarantees, according to Loshak.

There’s also a chronic illness rider that doesn’t have standard triggers and guarantees. “They're the Wild West,” she said. “There is no standardization for those. So, you really have to read your contract when you are buying a [policy] with a long-term care rider.”

Annuity with Long-Term Care/Chronic Illness Rider

Annuities with long-term care riders, though not available in every state, can be beneficial as well, said Loshak.

And these policies work well if someone wants to do a 1035 exchange, moving assets from an existing annuity to one with a rider. “It's a great way to repurpose money that is sitting there and to help fund your long-term care needs.

What solution is best for you? That depends on your primary and secondary objectives, and your budget. If you value a death benefit, for instance, the life insurance with a long-term rider might be right for you if it fits in with your budget.

Watch Part One: Four Reasons Why Long-term Care Should Be Part of Your Comprehensive Financial Plan.