Using Life Insurance to Solve for Long Term Care
LIfe insurance offers several ways to solve for long term care. Today I would like to talk about what the industry refers to as “hybrid” life products, in particular “single premium” life products. When considering long term care, with these products you can approach the need from two different angles.
The first is to consider geographically where you’re going to be when you need the care.This will determine how much of a monthly benefit you would need to have the policy take care of you. For example, in the state of Texas right now, the cost of care for a private room in a skilled facility is $5,400 a month for 2014. With a single premium life insurance approach, based on this benefit, the policy would determine how much of a “lump sum” you would have to put into the contract to achieve that monthly benefit. Because there is flexibility with these products, you could also approach it from the single premium side.You could determine that you have a specific amount of premium you want to invest, and based on your age it would calculate how much of a monthly benefit you would have available if you put that specific amount into the contract.
Another popular approach when reviewing your life insurance policies is to see how much cash value you might have already built up in a permanent product that you already own. Because of current tax laws, you could 1035 exchange your cash value from your current permanent life insurance policy, into one of these “hybrids”. This is a very popular approach because in essence you’re taking “lazy” money sitting a permanent life policy you already own, and moving it sideways into this new “hybrid” product. The base policy is still a permanent universal life policy, but it has long term care riders attached to it. The attraction to this product is the flexible option of walking away from the product should you change your mind. Most single premium life insurance products have a 100% return of premium meaning whatever single premium you invest, you can pull back out at anytime. Clients like the idea of having that flexible liquidity as well as having a death benefit and solving for long term care at the same time.
About the author: Mark Yurkovic has been in the life insurance business for over 12 years, and holds CLTC, LUTCF, and CES designations. He enjoys building remote control boats, and playing instruments including the piano, guitar, banjo, and mandolin. Mark would love to discuss life insurance options and work towards finding the best policy fit for your family. You can contact Mark at 1-800-651-1953 or MYurkovic@Pivot.com.