Care is Expensive!
10 Ways to Pay for Care: Long-Term Care Insurance
Understanding Your Long-Term Care Insurance Options:
Four Smart Paths to Protect Your Future
By Patrick Johnson, CLTC, CLU – Long-Term Care Specialist
When it comes to planning for the future, few topics are as critical—or as misunderstood—as long-term care insurance. The costs of care can be staggering, and without a plan in place, they can quickly erode a lifetime of savings.
The good news? Consumers today have more options than ever before. And here’s one key fact that surprises many people:
Income paid out from a long-term care policy is completely tax-free.
Let’s take a closer look at the four main types of long-term care plans available today—and how they can help provide security, flexibility, and peace of mind.
1. Traditional Long-Term Care Insurance
This is the plan most people think of first. Traditional long-term care (LTC) insurance has been around the longest and typically provides:
- A daily benefit amount (e.g., $200/day)
- A benefit period (2, 3, 4, or 5 years)
- An elimination period (usually around 90 days)
- Optional inflation protection (3% or 5%)
These plans are paid for on a monthly basis and designed purely for coverage—you only receive benefits if you go on claim. Because there’s no residual value at death, I often call these “cash flow plans.”
Underwriting for traditional policies focuses on morbidity—the likelihood that you’ll need care. Today, underwriting decisions tend to be a simple yes or no, and as a result, traditional LTC policies make up only about 7% of new cases being issued nationwide.
2. Hybrid Long-Term Care Policies
Hybrid plans combine long-term care coverage with a life insurance component, offering more flexibility and guaranteed benefits.
Originally, these policies required a single lump-sum premium—say, $100,000 upfront. Today, consumers have many payment options:
- Single-pay
- 5-pay or 10-pay plans
- Pay-to-age-65 or pay-to-age-100 options
These policies are popular because they provide fully guaranteed benefits with no premium increases. And unlike traditional plans, they pay out whether you need care, pass away, or both.
It’s no surprise hybrids now account for about 68% of all LTC insurance sales in the U.S.
3. Life Insurance with a Long-Term Care Rider
For younger consumers—typically ages 30 to 55—a life insurance policy with a long-term care rider can be an excellent fit.
In these plans, the primary motivation is life insurance. A consumer might purchase a $500,000 universal life policy, and simply add a 4% long-term care rider.
Here’s how it works:
- If you need long-term care, you can use 4% of your death benefit each month, tax-free, until the entire death benefit is used.
- If you never need care, your loved ones receive the full tax-free death benefit.
- The policy also builds cash value over time.
These plans provide flexibility, predictable premiums, and an easy way to combine protection for both life and care needs.
4. Indexed Annuities with Long-Term Care Benefits
This is one of the newest and fastest-growing options—and one I personally find very exciting.
An indexed annuity with LTC benefits allows your money to grow while also providing a pool of tax-free funds if you ever need care.
Here’s what makes it unique:
- You can allocate your funds among five S&P index options or a fixed account.
- If you pass away, your beneficiary receives the account value.
- If you need care, the carrier pays a tax-free income for a set period (often five years or 60 months).
- No receipts required—it pays on a cash indemnity basis.
- No elimination period, and you can’t be declined for coverage.
Instead of medical underwriting, you’ll complete a 30-minute interview that includes a simple cognitive and physical assessment. Based on your results, you’ll be placed into one of three categories: preferred, standard, or decline—but every applicant is accepted at some level.
An added bonus: these plans often include wellness benefits, such as the Assured Allies program, which helps clients live healthier, longer lives.
Currently, indexed annuity LTC plans make up about 22% of the market, and that number is growing as more carriers introduce similar options.
Choosing the Right Plan for You
With so many choices available today, it’s important to work with a qualified long-term care professional—someone who holds the CLTC (Certified in Long-Term Care) and CLU (Chartered Life Underwriter) designations.
The right specialist can help you:
- Compare plan types and carriers
- Understand underwriting requirements
- Choose the best funding strategy
- Design a plan that fits your age, health, and goals
Today’s long-term care insurance marketplace offers more choice, control, and flexibility than ever before. Whether you’re focused on protecting your income, preserving assets, or maintaining independence, there’s a plan designed to meet your needs.
The key is to start the conversation early—before a health event limits your options.
If you want to continue this conversation or need guidance, I’m here.
Patrick Johnson
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Our country is entering a new chapter, one we have never seen before… over 100 million people are 50 years of age or older, and the need for care is going to be more and more prevalent. We are dreaming of a nation where aging and care are understood and become part of our normal conversations with family.
To make this a reality, we need your help!