LTC 101:  If qualifying for long-term care insurance is a problem, are there options?

LTC 101: If qualifying for long-term care insurance is a problem, are there options?

The short answer is, well, maybe. While it depends on why a person is not qualified for long-term care (LTC) insurance, there is an option, a, single premium, fixed, deferred annuity that is designed with built-in long-term care benefits.

The advantages of this option are that it is easier to qualify for than insurance, has long-term care benefits, and if you don’t need long-term care, the money in the annuity can be used as income or passed on to heirs.

What is a fixed annuity? Simply stated it is a long-term, tax deferred, insurance contract designed for retirement. With a fixed annuity the retiree creates a stream of income for his or her lifetime or a certain number of years, their choice. The money placed in the annuity grows by a fixed and guaranteed interest rate. Taxes are deferred until the money is taken out.

The annuity option discussed here also features LTC benefits. These benefits are accessed in much the same way as the other forms of LTC coverage. To start the benefits, the covered person must need substantial assistance with two of the six activities of daily living (eating, bathing, dressing, continence, transferring, and toileting) or have a severe cognitive impairment. A medical professional must certify these conditions.

Once LTC payments are approved, and after a waiting period, the benefits are paid tax-free. Some of these annuities also have an optional feature that continues long-term care benefits for up to 9 years (conditions apply). The continuation payments are also tax-free.

One or two persons, called annuitants, can purchase these annuities. The LTC benefits can be paid to either annuitant individually or both at the same time.

Long-term care insurance is medically underwritten. Generally an insurance applicant must be in average-or-better health to qualify. The annuity option is also medically underwritten, but the applicant’s state of health can be “fair” and still qualify. Medical underwriting is, of course, very specific to the applicant’s personal situation.

This is a single premium annuity. That means that the annuitant(s) must deposit a large sum into the annuity which grows at a fixed rate of interest over an extended, contract period, say ten years. If the decision is made to take the money out early, a “surrender charge” may apply. However, authorized LTC benefits are immediately available, tax–free, and with no surrender charge.

The source for the funding of an annuity like this is usually money that is set-aside for a rainy day. Answering the question: “what would I need to liquidate if I needed long-term care tomorrow?” may put the source in focus. It may be another annuity or a CD.

There are lots of details that you must understand before you select this option. Please give us a call for a personalized illustration and Outline of Coverage. There is never a charge for consultation.

C. Lawrence “Larry” Thomas

C. Lawrence “Larry” Thomas began working with long-term care and Medicare programs in the mid- 1980s. He is currently associated with Insurance 101 Services to provide long- term care solutions to seniors and those approaching. Larry can be reached at (949) 374-3316 or ltinsurance@me.com.
CA Insurance License # 0C79256.

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