Voya also offers an accelerated benefit rider, which pays benefits if a life insurance policy holder contracts a terminal or critical illness or faces permanent confinement in a care facility.
“These are preferable to standalone LTC because policyholders keep the value of their policies as a death benefit if they don’t use the riders’ benefits,” says Wilken. “We would still argue that traditional LTC policies may be right for some clients, especially if they don’t need life insurance protection.”
Yet life insurance riders come with a few caveats, says Toumayants. For one, clients who access LTC through a life insurance product can’t take advantage of some states’ policies that exempt the value of a LTC policy from an individual’s Medicaid eligibility calculations. For another, life insurance riders often limit the amount a policyholder can use for their LTC needs, and if the client has an extended LTC need, they could exhaust their benefit altogether.
Toumayants also explores using accelerated benefit or chronic illness riders on annuity products to cover clients’ LTC needs.
“They have the potential to create an income stream that we can use for LTC expenses, especially because they increase the payout amount over time in most cases,” Toumayant says. “That’s appealing for people who want or need LTC but can’t purchase life insurance or an LTC policy because of health issues.”
Heider says that using an annuity can be cheaper than standalone LTC coverage or whole life, and because it pays a benefit overtime, an annuity avoids clients’ concerns over whether the coverage would be used.
Some clients will still not be able to afford to self insure or buy a whole life policy, or cover their entire need with an LTC policy, says Newman -- yet some LTC coverage is better than none, and advisors shouldn’t avoid the conversation just because of a client’s net worth.
“Every person, every financial planning client, needs some sort of plan for long-term care,” Newman says. “Not everyone needs long-term-care insurance. They just need to know what they’re going to do if this happens to them.”