Combination Life and Long Term Care Insurance Lifetime Benefits – Long Term Care University – 08/15/13




Long Term Care University – Question of the Month – 08/15/13
By Aaron Skloff, AIF, CFA, MBA

Q: We read the 1st, 2nd, 3rd, 4th and 5th Long Term Care University articles on Combination Life and Long Term Care insurance policies and decided to purchase a Combination policy.  Instead of a limited number of years of coverage, are lifetime benefits available on Combination (Hybrid or Linked Benefits or Asset Based) Life and Long Term Care (LTC) insurance policies?

The Problem – The Cost of an Extended Period of Long Term Care

According to the U.S. Department of Health and Human Services, 7 in 10 people over the age 65 will require long term care. Although the average length of long term care is three years, 20% will need care for longer than five years.  The cost of long term care is staggering: $90,000 per year for a semi-private room in a nursing facility, $42,000 per year for the base rate in an assisted living facility and $40,000 per year for 40 hours per week of home care.  Applying the historical 4%-5% compound growth rate of long term care services, the cost of care will double every 16 years.

One of the largest long term care insurance company’s recently reported that 50% of all claims dollars it has paid are due to dementia, including Alzheimer’s disease.  According to the Alzheimer’s Association, 1 in 9 people age 65 and older and about  1 in 3 people age 85 and older have Alzheimer’s disease.  The duration of Alzheimer’s disease is generally four to eight years after a diagnosis, but can last as long as 20 years.  Unfortunately, the cost of an extended period of long term care can destroy a lifetime of savings.

The Solution – Combination Life and Long Term Care Insurance with Lifetime BenefitsMature-couple-having-picnic-in-13905005-32

Lifetime Benefits (Unlimited Benefits) are extinct or on the verge of extinction at almost every Traditional Long Term Care Insurance company.  Many companies have reduced their own risks and increased consumers’ risks by limiting coverage to a maximum of 6, 8 or 10 years.  Fortunately, lifetime benefits (unlimited number of months or years) exist on Combination policies.

Numbers Speak Louder than Words.  Let’s look at a husband and wife that are each 55 years of age.  If they make a combined one-time premium payment of $257,457 they immediately gain a combined tax free $9,000 per month (or $108,000 per year) benefit available for an unlimited number of months for LTC costs.  Their monthly benefit will grow at a fixed 5% compound growth rate.  They will also gain a $225,000 tax free death benefit when the second person dies, assuming the policy’s LTC benefits are unused.  In 25 years when they are likely to need care, they will have a combined tax free $29,027 per month (or $348,323 per year) benefit available for an unlimited number of months for LTC costs.  If they each only need three years of care at the age of 80, their policy would provide a combined over $1 million of long term care costs.  That gives them over 4 times leverage on the premiums they paid.

Click to EnlargeCombinationLifeLTCLifetimeBenefits

Action Step – Purchase a Combination Life and Long Term Care Insurance with Lifetime Benefits

Since the length of care you will need is unknown, the ideal policy is one that provides a lifetime of long term care benefits.  In the event you never need long term care benefits a Combination policy will pay a life insurance benefit.  Either way, you win.

Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA) charter holder, Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a NJ based Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at or 908-464-3060.

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