Tuesday, April 21, 2015

Funding Long Term Care with your EXISTING term life policy

Last month we attended the Long Term Care Insurance (“LTCI”) conference in Colorado Springs.  The mood was somber, following last year’s 20% decline in overall LTCI sales.

In multiple breakout sessions we heard pleas for the industry to “do better” in creating long-term care solutions.
  
PolicyFlex does have a new long-term care solution.  We summarize it for you below.  First some background:

Baby boomers have increasingly resisted the idea of LTCI for various reasons.
  • It’s often hard to qualify, given health issues.
  • It’s expensive; and there’s a substantial risk of further premium increases even after they buy a policy.
  • It can be tough to make claims when they need help, requiring a high—some think unreasonably high—level of infirmity (inability to wash, dress, eat, etc.).
  • There’s usually a waiting period (e.g. a 60 or 90 day “elimination period”) before the carrier will begin reimbursing expenses.
  • There's the “use it or lose it” issue.  People are concerned that they will die before ever needing long-term care; or will only use only a part of their benefits. 

The insurance industry has sought to address some of these issues by creating “hybrid” or “combination” LTCI policies.  They provide both a long-term care benefit AND a death benefit.  They also offer riders that will return part of your money if, say, you die during the dreaded “elimination” period; or if you slip on a banana peel and die before ever needing long term care at all.  

Seniors should certainly investigate these “combo” policies.  Our impression is that qualifying is even harder than before (exams may be required for both the health and life aspects of the policy) and even more expensive.  But definitely shop around.

Against this somber back drop, PolicyFlex does have a new solution for one group of seniors:  those with assets to protect … who happen to already have a term life policy.

If you fall into this group you could, if need be, pay directly for long-term care and other health expenses during old age.  The idea probably doesn't make you happy, but you are probably even less happy at the thought of paying for LTCI with a high probability of never getting your money backor of depleting your assets.

PolicyFlex’s program is based on your existing term life insurance policy (so don’t let it expire before checking with us!).

Your term policy is converted in to a permanent policy, and the permanent policy becomes the basis for providing you and your beneficiaries with a new, combination living benefit / death benefit.  We call this Living Care Extension.  In some ways it’s similar to those “combo” policies described earlier, but it’s really an alternative to long term care insurance.

Under this new program, the living benefit can be used for long-term care (and, by the way, a variety of other medical expenses—see our fine print). 

But whatever portion of the total benefit you don’t use during your lifetime ….will go to your beneficiaries in the form or a death benefit. 

All of the program’s economics ultimately come from the underlying life insurance policy’s death benefit.  

In other words, your existing life insurance company continues to provide all coverage underlying Living Care’s benefits for you and your beneficiaries.  

A number of advantages are made possible with this approach, compared to traditional long-term care insurance or even hybrid policies:    

  • There is no health exam to apply.  Health impairment is not an obstacle, since you already own your term policy. (There is a short health questionnaire)
  • To make claims, there is no need to fail certain “activities of daily living,” such as the inability to dress, wash, feed yourself, etc.
  • There is no delay in receiving payment for your claims, i.e. no “elimination period” before PolicyFlex begins making reimbursements. 
  • Eligible claims are more broadly defined than with a typical LTCI policy.  
  • There is no risk of premium increases over time.   Your payments are contractually level and fixed from the start. 
  • Clients who stay in the program will receive a multiple of the payments they make.
  • If you stay in the program for at least 3 years, you are certain to at least get back your money, either in living benefits or in death benefits.

NOTE:  In order to fit the Living Care program you must be over 60 and have an existing term life insurance policy over $500,000. Other factors also go into our evaluation, but the evaluation is free to you and there is of course no obligation.
If you would like to inquire about your own term policy, you can submit it through this website.  (“Consumers” tab)

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