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Annuity Riders and Other LTC Options

seniors-1505935_640The cost of long-term care (LTC) can be astronomical, putting the financial future of families at stake without the proper protection. Recent headlines would have you believe that the long-term care insurance market is dwindling, but in reality, consumers have never had as many options as they do today. As advisors, it’s crucial to know the different choices well, and help clients choose the solution that suits their unique desires and needs.

Here’s a look at the options available in long-term care, according to a recent article from Financial Advisor Magazine.

Standalone LTC Insurance

With any carriers raising rates and removing options from this traditional product, many clients are choosing to steer clear. Despite the fact that benefits may never be used and the lack of guarantees, this insurance option is still applicable to many clients. Most policies are issued with a lifetime premium schedule, but the annual outlays are typically lower than options which come with a base life insurance or annuity product.

Life/LTC Combination Products

According to LIMRA, LTC solutions that are attached to a life insurance base product have outsold the standalone LTC insurance products for the last two years. These policies provide a death benefit if care is not necessary, however they do tend to have higher premium costs. Designed for clients that prefer to fund their LTC plan over a shorter period of time, this option is also compatible for those who have a need for a death benefit for a surviving spouse or heirs. Several of these solutions also offer return of premium options and are fully guaranteed, making them more attractive.

Short-term Care Insurance

The popularity of these products has taken off recently. These policies are often of a shorter duration (obviously), typically less than 2 years. They are usually discussed along with Medicare Supplement purchases, and as clients begin to realize that some coverage is better than none, many are choosing to add it on.

Annuity LTC Riders

Sales of these riders are also gaining momentum. Not only do they give protection for LTC expenses, but they also provide the ability to annuitize should care not be necessary. Impaired risk annuities for clients that have existing LTC needs are more attractive. This option is available for client who may not have planned for this risk or may not qualify for coverage due to an existing medical need.

A Lincoln Financial study recently found that most consumers are eager to speak with their advisor about their long-term care risks. As advisors, it’s critical to help clients understand the impact of the costs that care can have on an individual’s or family’s retirement plans. It is estimated that the average 65 year old will incur about $266,000 in long-term services and support costs, if they should require future formal care. With a greater than 50% chance that care is probable. It’s an important discussion that everyone should have.

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