50+ Lifestyles

Life Care Benefit

By Richard J. Schillig, CLU, ChFC, LUTCF
Independent Insurance and Financial Advisor

Did you know…..A life insurance policy can pay for senior care expenses? One out of two retirees will face these costs!

Long term care costs are very real and pose a clear risk to our valued retirement assets. Insurance for long-term care costs is also expensive, and consequently many folks elect NOT to purchase long-term care insurance. But that decision doesn’t forgive the expense – it remains a reality. A recent Genworth survey predicts one out of every two retirees will face these costs.

Consequently, planning for these costs is critical. An alternative to long-term care insurance or even better than an alternative – an addition to insurance is a long-term care benefit created with life insurance policy(s). A Long Term Care Benefit converts life insurance into monthly, tax-free payments covering any form of Senior Care; nursing home, assisted living, community care, home care. Funding of the Long-Term Care Benefit is created by converting existing life insurance. The benefit is created with no fees, premium payments, or obligations. Here is an option folks!

Do you have a life insurance policy with $50,000 of benefit? Instead of lapsing or surrendering the policy(s), convert the insurance to a benefit account creating monthly, tax-free payments on behalf of the individual receiving Senior Care. There are no wait periods; no care restrictions; no costs or obligations to apply. The Care Benefit is not a loan and even more good news – there are no premium payments.

Let’s give a couple examples. A male age 77 has $100,000 of whole life insurance. Since retirement the monthly premium payment on this policy is becoming burdensome. Converting this to a Long Term Care Benefit will provide $4,500 of monthly benefit for long-term care costs for up to 9 months leaving a residual $5,000 funeral benefit. No more premiums due. A female age 74 with a $50,000 life insurance policy converts to a Long Term Care Benefit providing $800 monthly benefit for 2 years. Funeral benefit remaining is $2,500. No additional premium due.

With every financial product there are advantages and disadvantages. In both of these examples costs can be considerably more than the benefit provided. But in both cases there is some help with costs of long-term care with additional income and elimination of a premium payment. Remember too, the benefit payment is income tax free.

A recent survey by Genworth resulted in finding median costs across the nation for nursing home services are $7,000 per month. In planning for long-term care costs with clients, we often hear of the home health care options in place of full nursing care. Home health providers are typically $20 per hour and require a minimum of 4 hours / day resulting in $2,400 monthly. Assisted living facilities costs are in-between these two number – median monthly cost $3,400. Regardless of the level of care long-term care costs are a risk to our resources. Statistics with the aging of the baby-boomers along with today’s life expectancy – one out of every two Seniors will require some level of long-term care.

Options exist today for alternatives to or additions to the long-term care insurance policies. Life Care Benefit is one of those options. Other options include annuities and life insurance. Remember this benefit – Long Term Care Benefit is not insurance. I encourage all families to talk about the risks we face with these costs. They remain a risk especially to spouses as well as to families. Additional information is available upon request. It is important to remember that long-term care costs are not covered by major medical insurance. Medicare provides very limited long-term care benefits.

We are continuing our monthly Community Meetings on Medicare choices during the month of May. May 19 we discuss the basis of Medicare and focus on Medicare Supplements. On May 21 we again discuss the basic of Medicare with a focus on the Medicare Advantage Plans

Richard J. Schillig, CLU, ChFC, LUTCF is an Independent Insurance and Financial Advisor with RJS and Associates, Inc. He can be reached at (563) 332-2200.