Self Funded Life Insurance and Long Term Care
Nearly 66% of all Americans will need some form of long term care (LTC) in the future; however, a majority will never purchase any sort of insurance. With nursing and other LTC costs sky-rocketing every year, many will have to use their entire net worth to pay for the services.
This was just the case with Linda and Jeff. Linda had not only gone through the emotional turmoil of watching her parents weaken and need long term care but also watch their financial decline, with their entire life savings being depleted. Everything they had worked for was gone within a matter of a few years.
Linda and Jeff were determined not to let this happen to themselves.
There are a couple of different approaches to long term care coverage. The traditional approach is like car insurance: you pay for a policy hope that it is well designed and will cover all future expenses. But healthcare is now much more expensive then it was 20 years ago, especially if you want full coverage.
Using the SIPS Retirement Planning System, we were able to construct a scenario where Linda and Jeff would invest $100,000 into an annuity with a guaranteed income stream. The distributions from the annuity would then be used to fund a life insurance policies with a 400,000 death benefit, with a long-term care rider. This is interesting because 100% of the $400,000 death benefit was available to be used for their long term care. Some long term policies talk about a return of premium, we returned it four fold. We needed the software to compare this idea with their current plan. We considered their concerns about potential LTC costs and the added benefit of a healthy legacy to their heirs. They went with the plan I had prepared on the screen. They went with their heart and eyes.
Many people do not take long-term care into consideration when planning for retirement, but Jeff and Linda do. For them, they had seen the hidden emotional and financial costs of an unprepared retirement. I feel we presented these client with a solid vision for the future that avoided these pitfalls, while also stretching a $100,000 investment into an immediate $400,000 asset. It came both as a tangible relief and joy to both Linda and Jeff.