We often use annuities to protect our clients from longevity – the risk of outliving their income. But annuities can also help protect against another risk of living longer – the risk of needing long-term care. Statistics show that almost 70 percent of the population will need long-term care, but less than 8 percent of people have traditional long-term care insurance.
Many advisors do not discuss the topic with their clients and view the LTC conversation as arduous; clients seem to be laissez faire or in denial that they will need some sort of care. Those with assets often state that they will use up some “safe” money (like a CD or money market) in their time of need. However, it’s not uncommon to deplete those resources at a rate of $5,000 to $10,000 per month for various types of home care or nursing home services.
Consider the leverage of a linked benefit annuity. With today’s evolving world of solutions, there are annuities that combine a powerful leverage and tax advantaged treatment of care coverage – think Pension Protection Act if funds are nonqualified. The client spends down their contract value, and if still on claim, the leverage factor begins after that. The fee is deducted from some contracts; others are more modular but the cost is generally less than traditional LTC plans.
Do you have any clients with old, non-qualified annuity contracts that are out of surrender with a low cost basis and a minimum guaranteed rate better than currently available? Do you have any clients who have asked about traditional LTC but have backed away because they could not grasp the value? Start having conversations with these clients, asking them what they would liquidate first if they experience a health event and are unable to do two of the six activities of daily living.
These plans are not for the uninsurable, but the process isn’t as rigorous as traditional, standalone LTC insurance and generally consists of a questionnaire, phone interview and medical information. If your client never has a need, the contract value is the death benefit. There are many options depending on the source of funds and the leverage your client is looking for.
The Bottom Line: Consider linked benefit options to protect your clients not only from the risk of outliving their income, but also from the potential costs of long-term care. Call Ash Brokerage, and we’ll help you start the conversation.
© 2018 Ash Brokerage LLC.