Clients who do not have long-term care coverage risk using their personal resources, exposing their families to financial burden and even impacting the wealth of future generations.
There is too much at risk when a client does not plan for their long-term care because the enormous cost of care continues to rise.
How will I pay for care?
If an individual has a long-term care claim during their retirement but does not have a long-term care plan, how will they fund the rest of their life?
First, they will dip into their personal resources. Many people end up leveraging their bank accounts and annuities, then their pension, 401(k) and individual retirement accounts.
What happens if that individual does not have all these assets? What if they run out of money? Where will they go if they cannot pay for a nursing home? They could be put into a critical financial state leading to debt, bankruptcy and financial burden on their family. This is the fastest way to deplete all of your assets, leave nothing behind and even take resources away from the family, causing a break in potential generational wealth.
People who are healthy and in their working years tend to ignore the need to invest and plan for long-term care because it’s not top of mind and does not benefit them in the present. This is a dangerous pretense, because our population is aging and creating a greater need for long-term care.
The good news is that the path to financial stability is simple and protects against the risk of long-term care needs. Funding for long-term care expenses can come from a variety of sources such as traditional long-term care insurance policies or personal resources (pensions, 401(k)s, IRAs, annuities and bank accounts.
How you can use life insurance to provide funding ?
Newer ways of funding long-term care include hybrid life insurance policies and life insurance policies with an LTC rider.
Traditional LTCi is designed to help fund long-term care costs and is a reliable way to supplement other sources of funding care. However, there are fewer LTCi choices in the marketplace and individual policies can be costly while the premiums are not guaranteed. The return on the dollars spent for these premiums cannot be recouped unless the policyholder absolutely needs care and is able to trigger the policy’s benefits. This is the “use it or lose it” nature of the product.
A hybrid life insurance policy has become a more popular way to fund long-term care. Hybrid life insurance links a life insurance policy with a long-term care policy. This is a great example of combining two resources to complement one another.
Hybrid life is more focused on long-term care benefits than on life insurance benefits. If someone owns a substantial amount of permanent life insurance but they don’t have any LTC benefits, a hybrid life policy can be a valuable solution to pay for care.
On the other hand, if an individual owns a term insurance policy the would be better off buying a permanent life insurance policy with an LTC rider.
The need for long-term care planning is a critical and often overlooked aspect of financial planning.
For help with planning or finding out what is the best path for you, my team is here to assist you. Reach out to schedule a consultation.
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