Breaking Down the Benefits of Asset-Based Long-Term Care
There’s a *70% chance that married couples over age 65 will have one of the spouses requiring long-term care.
In-home, hospice, nursing home, and other related long-term care are costly and can quickly drain a family’s wealth.
At Hosler Wealth Management, we work with our clients to use the proper tools and insurance vehicles to protect their hard-earned assets.
One of our favorite strategies is an asset-based long-term care insurance plan.
What is Asset-Based Long-Term Care?
Traditional long-term care works like a regular insurance policy, in which you pay a monthly or yearly premium until your health changes, and you go on claim. Traditional LTC works under the idea that you may claim long-term care at some point.
The problem with traditional Long Term Care policies is the rapidly rising premiums, forcing clients to consider whether to lower their coverage amounts, cutting into the potential benefit of these plans.
Asset-based long-term care works differently. The main difference between the two policies is that you build asset-based LTC plans around a life insurance model. They must account for both a payout upon death and the possibility of long-term care. Paying for them is generally done by using an existing asset.
Other financial benefits of an asset-based long-term care policy can include:
• Guaranteed premiums: Your rates will never increase.
• Guaranteed terms: Policy terms cannot be changed.
• Death benefit: If you die, your beneficiaries will receive a tax-free death benefit generally greater than your premiums.
• Return of Premium: Many policies allow you to ask for 80% to 100% of your premium back after the policy is paid in full
There are considerations where Asset-Based LTC may not work for you.
• You have to health qualify for these policies.
• If you have waited too long, the benefits vs. the costs start to be less beneficial.
• Most of these are reimbursement policies, so you will pay the expenses first and then be reimbursed by the insurance company.
With asset-based LTC plans, we don’t want to purchase so much insurance that we cover every dollar of potential care. Instead, we want to buy enough insurance so we don’t impoverish the surviving spouse or family after paying for their loved one’s care.
What Types of Care Does Asset-Based LTC Cover?
Beyond the financial benefits of providing for both long-term care and life insurance, asset-based plans cover a range of possible care scenarios, including:
• At-home care
• Assisted living
• Nursing home
• Respite care
• Other care, such as occasional senior care
But the key benefit is that when your health changes and you need to go on a claim with your LTC policy, you have funds to pay that cost without exhausting your other assets and impoverishing yourself and your family.
Now that we know what asset-based LTC is and what it covers let’s explore a few additional common questions about these policies.
Do I Have to Pay a Deductible with Asset-based Long-Term Care Plans?
Yes. When you first go on a claim, typically, there’s a 90-day deductible called an elimination period, where you must pay the costs out of pocket.
That means, depending on your situation, you’ll need to prepare to pay three months’ worth of those expenses before your long-term care kicks in.
When Should I Purchase Asset-Based Long-Term Care Coverage?
The sweet spot to secure a policy is between 45 and 60 years of age.
But the earlier you qualify for a policy, the better because you’ll receive better pricing and have more time to fully pay up your policy over its 10- or 20-year payment period.
Like other forms of life insurance, asset-based LTC plans require you to qualify based on your health. That means the application process requires you to submit your health information to the insurance company for review.
Generally, the application process takes between 45 and 60 days on the short end and up to 90 days on the long end.
When Can I Make a Claim with my Long-Term Care Policy?
You can file a claim against your policy when you can no longer perform any two of the six activities of daily living. Those are:
• Dress yourself
• Transferring (the ability to get up from a seated position)
If you can’t perform two of the six activities of daily living, that will generally trigger your ability to file a claim against your policy. You must get a signed letter from your doctor first.
Ready to Explore Asset-Based Long-Term Care?
Don’t put your family’s future financial situation in jeopardy. Let the experienced team at Hosler Wealth Management work with you to explore your asset-based long-term care options and secure a policy that protects you when the moment of truth arrives, and you need Long-Term care.
Request a call or send us a message to see how our financial specialists in Scottsdale and Prescott can help you ensure you create a comprehensive financial plan that incorporates long-term care coverage for you and your family.
Fixed insurance products and services are separate from and not offered through Commonwealth.
*LongTermCare.gov: “Someone turning age 65 today has almost a 70% chance of needing some type of long-term care services and supports in their remaining years”
This material is intended for informational/educational purposes only and should not be construed as specific tax, legal or investment advice. Individual circumstances may vary.
Disclosure: Securities and advisory services offered through Commonwealth Financial Network®, Member www.FINRA.org/www.SIPC.org, a Registered Investment Adviser. 700 S. Montezuma Street, Prescott, AZ 86303. Phone: 928.778.7666. This communication is strictly intended for individuals residing in AK, AZ, CA, CO, FL, GA, HI, ID, IL, MA, ME, NE, NJ, NM, NV, OH, TX, UT, VA, WA, WI. No offers may be made or accepted from any resident outside these states due to various state requirements and registration requirements regarding products and services. Fixed Insurance products and services offered through CES Insurance Agency. Tax preparation and accounting service offered by Hosler Wealth Management, LLC are separate and unrelated to Commonwealth. Any tax advice contained in this article is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding Federal or State tax penalties or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.
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