Unique LTC Solutions for Unique Clients

Stephen Denton   |   July 2022   |   3-minute read
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Not everyone should buy long-term care insurance. So, when you’ve identified the right prospect, what happens when they object?

Part of why your clients come to you is for unique solutions. Simply put, they don’t know what they don’t know. Which means with a little preparation you can solve objections before they arise. And we can help you get started.

Solution 1: Your Client’s HSA

If your client owns an HSA, they can use it to pay for long-term care insurance premiums. With this strategy, they get a tax deduction on the contributions paid into the account and their benefits grow tax-deferred. Plus, the distributions are tax-free if used for medical expenses, which LTC premiums are. And that means tax efficiency three times over!

The amount of HSA funds that can be applied to LTC premiums is based on age. And HSA contributions aren’t just limited to traditional LTC premiums. Linked benefit products that itemize their premiums are also eligible.

2022 Eligible Premiums***

  • Age 40 or Below - $450
  • Age 41-50 - $850
  • Age 51-60 - $1,690
  • Age 61-70 - $4,510
  • Age 71 and Above - $5,640

Linked benefit premiums that are categorized as “separately identifiable,” meet the definition of tax-qualified under IRC 7702(B). This will allow your clients to withdraw money tax-free from an HSA to pay the portion that is dedicated to the LTC premium. (It is important to note that the premium applied to the life insurance benefit is not tax deductible under current IRS guidelines.)

Let’s look at an example. A client is interested in a 10-pay linked benefit policy, with an annual premium of $10,000.

  • Life insurance premium - $5,272.51
  • LTC rider premium- $500.40
  • LTC Extension of Benefits premium - $1,175.95
  • LTC Inflation Protection rider premium - $3,051.14

Solution 2: Group Plans

For employers that are concerned about offering benefits only to select employees, offering a plan through the worksite might be the ideal solution. Not only are there tax benefits available specific to businesses, but group plans can also offer a discount, simplified underwriting and group billing.

With lots of different funding options, employers can choose who they want to fund through the company. Many employers will fund coverage for executives and key employees, but still be able to offer discounts for the rest of their team.

In addition, depending on how the policies are funded and how the company is set up, there are potential tax benefits for both employees and businesses. But perhaps the most important benefit could be the ability of business owners to offer an additional level of comfort about the future for their employees.

Solution 3: Linked Benefit Plans

For clients worried about increasing premiums or use-it-or-lose it, a linked-benefit plan combining life and LTC offers guaranteed premiums and a death benefit when premiums aren’t used. Or, for clients with health concerns, a linked benefit plan built on an annuity chassis can offer minimal underwriting.

In addition, many linked benefits offer accelerated payment options, allowing them to pay the policy up in 10 years, for example. For some, this overcomes the objection of having to commit to payments for the rest of their lives.

And, with so many different carriers offering linked benefit plans, it’s possible to find the plan that fits your individual client.

It does still all begin with a willingness to talk about long-term care with your clients. But now you have something new to present when they bring up concerns about taxes and funding. You also have your Ash LTC team ready answer questions, design coverage or even just talk through different ideas. So, start the conversation today.

***Source: IRS Revenue Procedure 2016-55 (2022 limits)

The per-diem limitation under Section 7702B(d)(4) for periodic payments received under a qualified long-term care insurance contract for 2022 are $390.

About the Author

As an LTC Specialist for Ash Brokerage, Stephen is committed to helping advisors have long-term care conversations with their clients. Prior to joining Ash, Stephen earned a Bachelor’s in Finance from Rowan University as well as his Series 6 and 63 and life and health licenses. He spent 10 years in the mortgage industry in both sales and operations before transitioning to Lincoln Financial in 2007, where he worked for 14 years as an internal wholesaler for linked benefit products.