Long Term Care (LTC) is a legitimate concern for retirees and with traditional Long Term Care Insurance on the decline, many retirees are looking elsewhere to solve the need for some type of protection. Recently the annuity industry has addressed the need for LTC with two types of annuity designs, the use of Income Riders and annuity products that increase values specifically for LTC.
Income Riders That Double
Another interesting benefit that we are now seeing within Income Riders available with an Index Annuity, is the Income Doubler for Long Term Care. Once again there is a wide variation within the products being offered today so let’s jump into the details.
A few of the carriers have added a very valuable benefit for retirees to be able to help cover the high cost of unforeseen Long Term Care Expenses. How this benefit works is if the covered person, or spouse (more on that later), needs Long Term Care then the income payment will double for a period of usually 5 years or longer.
For example if at age 75, the Annuity Income Rider provides $25,000 per year as a lifetime income, then if that person, (or spouse depending on the contract), meets the qualifications for LTC, then the income would double to $50,000 per year!
THERE IS NO UNDERWRITING OR QUALIFICATIONS FOR THIS BENEFIT!! Usually the only question they may ask is if you’re currently needing care. This can be extremely important for individuals with health conditions that may disqualify them from ever getting any type of LTC coverage.
Types of Care. The best contracts within LTC Income Riders will provide all three levels of care, Home Care, Assisted Living, and Nursing Home. There are only a few that offer this on a complete level!
A few will provide just Assisted Living and Nursing Home, with the remaining providing Nursing Home only.
Waiting Period. Most annuity contracts will allow the doubler to be triggered within 2 to 5 years from the annuity issue date.
Qualification. Most of the annuity contracts use the normal language we see in long term care contracts today, the inability to perform 2 out of 6 activities of daily living. They include Eating, Bathing, Dressing, Toileting, Transferring (Walking), and Continence.
Gotcha Clause! It really is important to understand the language within the annuity contracts that provide LTC Income Riders. For example, the majority of income riders with the LTC doubler will not double, if the actual account value goes to zero from previous withdrawals prior to needing LTC, but there a few that will double even if the account value has run out of money. This is an important fact to consider!
Will It Cover Both Spouses? This can be very confusing…will the annuity contract cover both spouses even if one isn’t listed as a joint annuitant? Some contracts will allow it, some don’t.
Annuity Contracts That Increase In Value for LTC
Another annuity LTC design available today, is an increase in the account value for LTC. What the annuity will do is allow payouts usually at 2 to 4% per month for LTC. They will then extend the payouts beyond the client’s original account value usually for a set number of years. This is where the real insurance comes in, which if someone has care for longer than a few years this type of annuity can provide exceptional protection. There are a few different variations available on the market for this type of design.
Underwriting Is Involved. Usually this type of plan will have some health qualifications and my include a telephone interview.
Crediting is Usually in a Fixed Only Design. Most of these types of contracts do not allow indexing gains but rather a fixed rate each year.
Protecting yourself for LTC with the use of annuities can be a very good decision, but you need to do your homework!! There are many contract variations and only a few available have all of the provisions we like to see to make sure they will be effective for you should you need LTC coverage.