Is it possible to get free long term care insurance? Not in the traditional way, but today we’re going to continue the series on long term care which began here and show you two breakthrough solutions to providing significant chronic illness benefits without having to pay for them if you don’t need them. If you do need them, then you’ll be passing less money on to your heirs. But if you need them without some type of long term care benefit, you’ll be passing little to nothing to your heirs, so this is an exciting solution! Let’s look at these two options…
Lump Sum Product
This is a great option for those who are at or near retirement, have saved up assets, and don’t want to pay the high premium necessary for a standalone long term care product, but do want to cover the need. As always, the earlier you start the better, but this type of product can really make a lot of sense even in your 70’s. There are different products, but let’s give an example of how a product like this might work…
Let’s say you are 65 years old and have $100,000 sitting in the bank earning barely over nothing in interest in the bank. You decide that instead of leaving your money with the bank, you’ll put it with an insurance (who is probably much more financial fit than the bank anyways) to provide a little protection.
For your $100,000 you have just bought yourself $450,000 of LTC benefit to reimburse any Long Term Care costs that you incur once qualified. This works about to over $6,500/month for 7 years. Not bad, right?
Well, what happens if you don’t need Long Term Care? What if you just die of a heart attack one day? In that case, a death benefit (in this case of) $151,000 goes to your beneficiary. This is not a huge death benefit for the money put in the policy because this policy is aimed at providing substantial LTC coverage, but you would have had to live to be about 135 to earn that much interest in the banks at today’s rates!
Well, what if you decide you want your money back? Some companies will issue this type of policy with a Return of Premium feature, so if you decide at some point that this isn’t right for you, you can simply get your money back.
Obviously, you have to have the cash to take advantage of this type of policy, but if you do, this can be a great solution. If you don’t have any assets to speak of, you can still use this next option…
Life Insurance Living Benefits
The Life insurance industry has recently introduced a new living benefit that covers Chronic Illness. In other words, Long Term Care. Each company structures it a little differently, but for little to no cost, you can add this powerful benefit.
This benefit basically pays you’re your death benefit before you died because you qualified for the Chronic Illness Rider. Each company that offers this does it a little differently, but let’s say for example that they will pay you up to 2% of your death benefit per month when you qualify for a long term care need. This could obviously not go beyond 4 years, but it would be your choice whether or not to exercise the option the entire way through the process.
If the benefit is at no cost upfront, it will come at a cost if you decide to exercise it. But that is a powerful option to have in your back pocket. Basically, they would give you one amount, but reduce your benefit by a larger amount. So for example (and these numbers are absolutely contrived from the imagination for this example)…
Let’s say you qualify for an $8,000 per month benefit. Perhaps, each time they paid you this, they would reduce your death benefit by $10,000. It would be up to your whether or not you wanted to exercise this option each month that you took it. And of course, you could take less than the full amount you were eligible for.
This is a very powerful way to provide some protection to an important and often unprotected need at little to no cost. It would not provide the same long lasting coverage that an unlimited standalone policy would, but it is much more affordable to most people and can be done in coordination with accomplishing other wealth building goals!
This is the 4th post in our series of innovative new insurance products. You can find the previous posts at: 1) Innovative Insurance, 2) Long Term Care, & 3) Long Term Care Solutions. If you’d like to read the entire series on insurance that we previously wrote, you can do so by reading Pt 1, Pt 2, Pt 3, Pt 4, Pt 5, Pt 6, Pt 7, Pt 8, Pt 9, Pt 10, Pt 11, Pt 12 and Pt 13.