The New York Times and KFF Heath News article “Why Long-Term Care Insurance Falls Short for So Many” (no paywall) paints a dismal portrait of long term care (LTC) insurance policy holders, but there are currently viable coverage options for those in their 50s and 60s.
These are life insurance with chronic illness or long term care benefits, hybrid products that offer coverage with premium stability. One of the best is a product from American General called “Value Plus Protector III”
How much LTC or chronic illness coverage will one need ? One benchmark is 3 years: actually longer for women, less for men. The IRS per diem tax deductible limit for 2023 is $420 per day, or $12,775 per month and $153,330 a year. Rounding off that’s a $460,000 benefit for 3 years.
American General “Value Plus Protector III” IUL
$460,000 increasing death benefit life insurance,
increasing chronic illness accelerated benefit rider
Female age 58, preferred non-tobacco
$8,035.28 annual
Female age 63, preferred non-tobacco
$10,042.81 annual
Female age 68, preferred non-tobacco
$13,872.79 annual
Male age 58, preferred non-tobacco
$9,007.07 annual
Male age 63, preferred non-tobacco
$11,479.22 annual
Male age 68, preferred non-tobacco
$16,045.07 annual
Affordability:
Reduce premium by opting for a level benefit instead of increased benefit. Look at two years worth of LTC benefits $305,000 face amount versus three years.
Coverage: The no lapse guarantee (NLG) was set at age 90. One may structure the NLG to age 100 for additional premium, if longevity is a concern. The non guaranteed side, the length of coverage, will change depending on crediting performance. An IUL’s premiums are flexible. One may over fund to extend the non guaranteed coverage or for cash value accumulation; one may fund less than the NLG premium, in effect lowering or forgoing the NLG and have policy cash value accumulation offset premiums.
American General “Value Plus Protector III” IUL
quotes based on guarantee age 90 premium age, 5% S&P 500 high cap rate account all years, increasing death benefit option. Quotes had an age 90 no lapse guarantee, with the non guaranteed side ranging to about age 95 to age 97. Maximum Monthly Benefit Amount: Monthly IRS Maximum Benefit
return of premium surrender option
year 20: up to 50% premium of premium paid
year 25: up to 100% of premium premium paid
An increasing death benefit helps the chronic illness coverage keep pace with inflation. The IRS per diem long term care tax deductible limit for 2024 will decrease to $410 per day, or $12,470 per month. This decrease is highly unusual. The per diem limit generally monthly benefit allowance will help American General’s limit keep pace with inflation.