As Indiana elder law attorneys, we know that long-term care planning has an important place in both retirement and estate planning, and at Geyer Law, we make every effort to help clients take charge of their finances and protect both themselves and their heirs against the ever-escalating costs of long term care.
In a survey conducted by Mutual of Omaha, it was found that there were two “triggers” that caused people to purchase Long Term Care insurance: 1) they were either getting ready to retire,or (2) they knew someone experiencing a long-term care situation. This first-hand experience with a long term care situation made many people say, “I don’t want that to happen to me.”
Even as awareness of the need has increased, the escalation in costs of care has been daunting, to say the least. The National 2024 Cost of Care Survey showed cost increases continuing to outpace inflation rates.
In past blog posts, we made note of two developments in long term care insurance:
- a) living benefit riders on life insurance policies, in which the payment of the death benefit is “accelerated” and paid out while the insured is still alive to pay for terminal illness or long term care costs
- b) hybrid policies – These are “combo” life insurance/long term care policies that allow death benefits to be used towards long-term care costs.
In today’s Geyer Law blog post, we want to highlight a third approach to the purchase of long term care coverage – Linked Benefit policies. Jeff Hess, who advises financial planners on insurance matters, explains that, as is true of hybrid policies and living benefit riders, linked benefit policies addresses the need for long term care coverage, while preserving the ability to pass on accumulated cash value when long term benefits have not needed to be used.
In Indiana, the annual cost of long term care in 2024 ranged from $75,000 to $100,000, and had escalated 20% from the prior year. Meanwhile, due to the costs of healthcare inflation and increased demand from an aging population, premiums for LTC insurance continue to escalate sharply.
Linked Benefit policies, now offered by 6-8 major insurance companies, offer the opportunity to pre-fund those costs, condensing payments into a ten to fifteen year pay period. In the fortunate event that the insured never needs care, or uses only a portion of the Long Term Care benefits, when the insured dies, the beneficiaries receive a death benefit.
Advantages of linked benefit plans over traditional LTC insurance:
- Unlike most traditional LTC policies, linked benefit policies have a guaranteed premium, so the cost does not increase over time.
- Unlike traditional LTC policies, a benefit is ensured to be paid out in one form or another.
- Unlike traditional LTC policies, there is a built-in death benefit (even accounting for LTC claims)
For consumers planning their retirement, the main appeal of linked-benefit insurance, Jeff Hess’ financial planner clients have found, it the ability to secure guaranteed, lifelong coverage with fixed costs that can be fully paid off either before retirement or in the early stages of retirement.
“It can be expensive to age in America – especially if you end up needing long-term care,” Ben Geier admitted in a CBS interview. “The simple fact is that most people won’t be able to afford that type of cost out of pocket,” Geier admits. At Geyer Law, we realize that, while some clients may not be able to afford the linked-benefit condensed-premiums, pre-funding long term care costs can be a great retirement planning option for some.
Jeff Hess
RIA Consultant with Palladium Group
Direct | (317) 775-6339
– by Ronnie of the Geyer Legal Group, PC blog team
