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Life Health > Life Insurance > Term Insurance

Long-Term Care Insurance as an Asset

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Your prospects remain nervous about their portfolios and how much income they can count on to make ends meet and pay their bills.

A qualified long-term care insurance (LTCI) policy or rider on a hybrid life/LTC policy could help them meet this challenge, because LTCI is an asset with a known value that doesn’t fluctuate. It can also have distinct tax-favored treatment under most circumstances.

Your prospects may not have a plan as to where the money would come from to pay the expenses associated an untimely event such as a chronic illness or injury.

How will they pay if they have to hire home health aides or move to an assisted living facility or nursing home?

Liquidating assets during a market decline could force the sale of these assets at inopportune times and thus perhaps lock in losses. A forced sale of assets could also result in taxation, premature withdrawal penalties or other financial repercussions, including confusion about which assets should be sold first and in what order.

If your client already has a qualified LTCI policy or rider on a hybrid life/LTC policy, this is the time to remind them of the potential advantage it offers. You can help them have greater confidence in the purchase they made, in some cases many years ago.

But if you are presenting LTC insurance or a hybrid LTC product for the first time to a prospective client, informing them of these advantages could help you close the sale of the policy. This is particularly true for your more analytical clients who think more critically about these kinds of purchases and place a great emphasis on pure, practical, number crunching.

Of course, the information provided here is not to be interpreted as legal or tax advice.

For information regarding your own specific situation please contact your attorney or tax advisor. And, of course, clients and prospective clients should do the same.

But, in general, LTCI may offer more benefits than prospective clients realize.

LTC Insurance Tax Benefits for the Self-Employed and Small Business Owner

One of the great potential benefits to business owners of small firms or self-employed individuals is that, in most circumstances, they should be able to deduct a portion, if not all, of their LTCI premiums. In many cases they may also be able to deduct their spouse’s premiums as well. When a prospective client becomes aware of this advantage, it can often be the key to ending the fence-sitting and get past the hesitation to purchase LTC insurance.

The possible tax deduction is age-based and is usually indexed for inflation, so you’ll want to have the applicable IRS table in front of you to be ready to point it out. Of course, tax treatment alone shouldn’t be the main driver, but it certainly can sweeten the pot. Clients who need an additional tax deduction and can get approved and pay premiums this year may be able to log the eligible LTC premium for 2011 as a year-end tax planning strategy.

Make Hybrid LTC Products a Part of Your Presentations

Hybrid LTC insurance products have already emerged as a compelling option to provide to your prospects, and yet many agents still don’t think to include them as often as perhaps they should.

Since many of the hybrid products require large single premiums up front to make the calculated long-term care benefit meaningful, they’ll appeal more often to buyers who have these kinds of lump-sums available—upper middle income to affluent buyers would be among the most suitable prospects.

Also, because hybrid products are generally combining either life insurance with LTC benefits—some with guaranteed cash surrender value–or annuities with LTC benefits, they can be popular among your prospects who might shy away from traditional “use or lose it” LTC insurance. This is because they’ll likely get something out of it if they don’t make an LTC claim and don’t use the policy benefits—the chief complaint of LTC insurance skeptics.

When you’re first meeting with a prospective LTC buyer, a full detailed fact finder up front gives you a better chance at uncovering assets that might be better deployed in a single-premium hybrid product. Older annuities or life insurance policies with significant cash build-up (possibly taxable) that the client might not need for their own purposes any longer could be more strategically positioned in a hybrid LTC product.

More strategies for using hybrid options, such as purchase of a modest traditional LTC product along with a hybrid LTC product, that could be a “win win” for your long term care prospects.


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