July 28, 2021
Is Long-Term Care Insurance Better Than Indexed Universal Life and Fixed Indexed Annuity?
Is Long-term Care Insurance better than Indexed Universal Life and Fixed Indexed Annuity?
In this episode, Chris Berry answers the question: Please explain why Long-term care insurance may be a good investment better than FIA or IUL.
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Episode Transcript
Please explain why long-term care may be a good investment better than FIA or IUL?
Welcome to Berry’s Bites please join our host attorney and financial advisor Chris Berry. Why is long-term care, I’m assuming insurance a good investment better than FIA or IUL? Okay, so it is insurance I don’t think any investment is good or bad I think they’re all tools it depends on what your goal is and in fact pure traditional long-term care insurance, I would hardly ever use that tool anymore, to be honest. I’m not a big fan of pure traditional long-term care insurance the reason for that is sure it addresses your goal of long-term care, but there are two big things; I’ve had a lot of clients or a lot of conversations with clients that have purchased these.
First of all the premiums can increase on you at any time I just got off a call with clients this week where they purchased policy a number of years ago before they met me. Been paying on it every year I think their premium is like 3 000 for one person and 2 800 for the other and they just received a notice that unless they kick in like an extra thousand dollars a year that their policy benefits are going to go down.
One problem is the premium increases and then also any value with these is lost at death we saw a lot of insurance companies get out of the business entirely if you have pure traditional long-term care insurance I’m not saying just let it lapse or anything because it might be a good policy to maintain but I wouldn’t recommend typically pure traditional long-term care insurance for an individual instead that’s where we look at more of a financial insurance strategy where now we get into tools and maybe we look at index universal life which is cash value life insurance that could be used for tax-free income, where the cash value grows.
And if the market goes down you don’t lose anything the market goes up you get the upside and then the death benefit could double as a long-term care benefit or what I call asset-based long-term care where now we’re just purchasing a death benefit that doubles as a long-term care benefit. So it might be a 500 000 death benefit that also could be used for long-term care so you’re either going to need it for long-term care or if you pass away then whatever is left of that policy would go to your beneficiaries potentially tax-free so getting the question why is long-term care insurance a good investment. I can’t answer that without knowing what the goals are and the strategy but if I’m looking at the specific tools I probably would look at maybe an asset protection trust cash value life insurance asset-based long-term care or there’s even fixed index annuities. Where we can turn this into an income stream for life and then if you were to need long-term care the income will double if you need long-term care for a period of time nice thing about this is there’s no underwriting versus these two would have underwriting where you have to be relatively healthy we could do this like if you had a loved one that was already diagnosed with Parkinson’s or something like that so hopefully that was helpful. Thank you.