Long-Term Care Benefits Become More Accessible To All With Voluntary Permanent Life Plans
Carrying long-term care insurance is a great idea. We’re living longer, and the chances that we’ll need some type of long-term care services in our lifetime are increasing accordingly. According to the AARP Public Policy Institute, 52% of people who turn 65 today will develop a severe disability that requires long-term support services at some point.
Two Birds, One Stone
An increasingly popular strategy for making LTC benefits more accessible to the average employee is by offering permanent life insurance plans that have them built in.
Some attractive additional features with these plans include the ability to apply at initial offering without answering health history questions, early withdrawal of benefits for terminal illness diagnosis, cash value accumulation and portability at the payroll rate.
Why settle for "or" when you can have "and"?
Here’s how it works: The employee purchases a voluntary Universal Life or Whole Life plan through payroll deduction. If the employee dies, it acts like any other life insurance and the death benefit is paid to their beneficiary. But if the employee requires long-term care, the death benefit becomes a source of cash that can be drawn monthly and used for care expenses. This depletes the death benefit, but many plans allow for up to two-times the original death benefit to be withdrawn and will still leave some small amount of life insurance intact.
Example
Employee purchases a $100,000 Universal Life policy with LTC benefits included
Employee dies:
Payout to beneficiary = $100,000
Employee requires long-term care:
Payout = $4000/month for 25 months
Extension benefit pays an additional $4000/month for another 25 months
LTC benefits are exhausted and final policy is paid-up with a benefit of $25,000
Know Your Options
If you’re considering offering a benefit like this to your clients or employees, here are some questions you should ask when reviewing carrier offerings:
How much of a benefit will employees be able to apply for without answering health questions? This is the “guaranteed issue” amount.
What is the trigger for using the long-term care benefits? Being unable to perform two Activities of Daily Living, as certified by a doctor, is standard.
Is there a waiting period that must be satisfied before starting to withdraw long-term care benefits? 90 days is standard.
Are there limitations to what kind of long-term care qualifies? For example, can you use the benefit toward in-home care, or must care be provided in a licensed facility?
Does the carrier offer an extension of benefits? This is the feature that doubles the LTC payout. Availability can vary by state.
At what rate does the policy accumulate cash value? Is that fixed (typical with Whole Life) or can it change (Universal Life)? Does the carrier offer a guaranteed rate of return?
Are there plan options that give you a choice about what your premium dollar is buying? For example, some Universal Life plans can be High Cash Value (more of your premium goes toward accumulating cash value) or High Face Amount (more of your premium goes toward purchasing life insurance benefit).
If you use up all your long-term care benefit, do you have any life insurance left?
Working with the right partner matters a lot with benefits like this. Because of our carrier relationships, clients of The Voluntary Benefits Shop get much higher levels of guaranteed issue coverage than they would if they tried to arrange these plans on their own.