Clients may be reluctant to buy long-term-care insurance as policies are relatively expensive and might never be used if custodial care isn’t needed, but there are other ways to provide some coverage for a potentially major expense.

“Options for LTC planning have become much more flexible,” says Renee Larson, vice president of life and LTC sales for Raymond James Insurance Group in St. Petersburg, Fla.

LTC insurance solutions have gone from “use it or lose it” to “use it or use it,” she says, as hybrid products combine either life insurance or annuities with LTC riders, if such care is needed, so clients know that someone will receive some form of payout.

“I don’t hesitate to recommend life insurance or an annuity with an LTC rider to clients,” says Deborah Juran, a senior vice president and financial advisor in RBC Wealth Management’s Monterey, Calif., office. “The way I see it, they or their beneficiaries will get the money back no matter what, through the death benefit, the LTC benefit or both.”


“Another benefit of these hybrid products is that they can be funded, tax-free, with existing life insurance or annuities,” Larson says. “When you have clients who own non-qualified annuities with gains and they no longer want the annuity for income, consider exchanging for an annuity with LTC benefits.”

Alternatively, a client may have an old life insurance policy that has accumulated a large cash value. This could be swapped for a hybrid policy that would offer a death benefit and LTC benefits.

If it isn’t used for care, the policy eventually will pay a death benefit.

“We are seeing a lot of people who have built up cash value life insurance policies and are now rolling them into more current policies, which price better and offer long-term care,” Juran says.

“I am currently working with a husband and wife to roll the cash value from their existing policy [$350,000 of life insurance] into a new policy,” she says. “This will increase their life insurance policy to $1 million and give $20,000 a month in long-term care.”


In other situations, a healthy client may be primarily looking to solve an LTC need.

“We look at the hybrid life options where there is a large bucket for long-term-care expenses and a smaller bucket providing a death benefit. This product is usually funded with a single premium, averaging $100,000,” Larson says.

“In this example, that would provide a 60-year-old female with approximately $500,000 in LTC benefits, which could be used over a six-year period,” she says. “If the client never needed care, it could provide a $125,000 death benefit or a return of premiums paid.”

Donald Jay Korn is a New York-based financial writer who contributes to On Wall Street and Financial Planning.

This story is part of a 30-day series on retirement planning strategies.

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