For the past few weeks, we’ve been talking about innovations in the long-term care space.
Long-term care coverage can be enormously expensive. Insurance companies have long offered discounts on coverage for couples, but single people are forced to pay significantly higher prices.
Traditionally, insurance companies have considered the definition of a couple to encompass marriage, domestic partnership, or common law marriage as recognized in the couples’ state of residence. That leaves a lot of people out in the cold at a time when they can scarce afford it.
However, an innovative product is redefining what a couple is, at least for insurance pricing purposes. With this product, any two individuals who have an insurable interest in each other and an age difference no greater than 25 years can benefit from the same discount a traditional couple would enjoy. The product can be used by siblings, parent and child, business partners, or any two people who meet the age differential requirement and can demonstrate an insurable interest.
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In one recent example a family of four siblings, three brothers and a sister, decided to take advantage of this opportunity. Although all young, with ages ranging from 47 to 55, the siblings were concerned about the future after witnessing their mother spend eight years in a memory care facility at a cost of close to $1 million. They realized that the time to begin preparing for the future was now. Each of the siblings wanted $12,000 per month in long-term care benefits for life. For individual policies, the costs would have been as follows:
Richard, 55 $203,362
Steve, 54 $196,577
Davis, 47 $154,110
Christen, 49 $150,631
The total premium for all four siblings would be $704,680.
Based on joint policies, the savings were considerable. By pairing each older sibling with a younger sibling, it was possible to reduce the issue age and premium. The joint policies offered each sibling $12,000 of lifetime long-term care insurance. Together, Richard and Davis paid a premium of $187,370, or $93,685 each. Steve and Christen paid a premium of $166,604, or $83,302 each.
The total premium of $353,974 to cover all four siblings with lifetime benefits was $350,706 lower than the total would be for individual policies. Broken out, the siblings individually saved as follows:
Richard, 55 $109,677
Steve, 54 $113,275
Davis, 47 $60,425
Christen, 49 $67,329
Depending on each insured pair’s circumstances, there are several options for funding policies. Policyholders may pay a single premium resulting in a set amount of coverage. This can be funded with a lump sum payment, or the insured individuals may propose a monthly payment for a specified number of years. Alternatively, as in this example, the insured parties may state the amount of coverage they would like to have, and the premium will be determined on that basis.
With 69% of 65-year-olds today likely to need long-term care at some point, it pays to plan for the future. In the event you’re able to demonstrate an insurable interest, it only makes sense to discover how a joint policy option might benefit you.
To find out more details on this Unique Long Term Care Strategy
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