Long Term Care Life Insurance

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This is the Truth Network. Welcome to Finishing Well, brought to you by cardinalguide.com with certified financial planner, Hans Scheil, best-selling author and financial planner helping families finish well for over 40 years. On Finishing Well, we'll examine both biblical and practical knowledge to assist families in finishing well, including discussions on managing social security, Medicare, IRAs, long-term care, life insurance, investments, and taxes. Now let's get started with Finishing Well. What a show we have for you today on Finishing Well. It is going to be a whopper, I can assure you.

It's a whopper for me. It's such a huge story. It's affected my life so greatly. It affects it more than I ever would have dreamed.

And the idea here is long-term care life insurance, which I would submit to you. You know, names are critically important in the Bible, and God would change people's names to try to get it right, you know, or maybe even know that Noah's name spelled backwards means grace because the people, when they were all dead, were going to need grace. Like, can you imagine? You're the only person left on this world. And so Noah was given that name because he'd really have to take care of it. Can you imagine how Shem, Ham, and Japheth all felt about the fact that every friend that they knew was dead, right?

And so that idea of grace and Noah fit together all too well, and it's all in a name. Well, as Hans and I have been talking about as we got ready for the show, the idea of life insurance is just a bad name, and long-term care insurance is a bad name because in neither case, this has to do with my life nor does it have to do with my care. I'll explain why, as I know all too well, is that obviously that life insurance is not for your life, but it's for your death, right? And for your family is what the benefit of life insurance is for your family. And actually, long-term care is not so much about the care because you're going to get care, but the issue is, again, for your family. Because what I learned, and I'm just going to say that I've learned this all too well over the last three or four years since I started to take care of my father, and Tammy and I were caregivers for both my father and my mother-in-law, and my mother-in-law just passed away in March, is the amount of guilt that you end up as a caregiver when that person dies compared to if you weren't their caregiver is phenomenally different. I bet you if you go interview siblings, one was a caregiver and the other, and look at how the mourning process happened for the caregiver versus the others, and you'll see that long-term care insurance is not necessarily about your care as much as it is about how much mourning process you're going to put your kids through.

I'm telling you, it's phenomenal what I've seen in my own family, and I really just began to see why my sister grieved so much more for my mother than I did because she was her caregiver. And it's not that if somebody has long-term care insurance, you're still not going to help in the care process, but the responsibility factor and so many other things figure into this in ways that I never would have dreamed possible, Hans. And so I think it's absolutely—in fact, I would just go on the record of saying I think long-term care insurance is more important than life insurance because money can't buy mental health, right? Well, yeah, you certainly can't take the life insurance proceeds and restore someone's mental health from this whole thing, but let's—I mean, where this came is you don't buy long-term care insurance because that's what we're talking about today, and we're trying to influence you to at least consider it, okay?

And you don't do this for yourself. You buy long-term care insurance for your family and because they're the ones that are going to suffer. I mean, my mother, when she had really 10 years and really the last five or six were the places where we were having to take care of her, just the fact that she had insurance helped with the whole situation because we could at least take money and set it over here because it still leaves all the other problems. Like, number one, five of us kids, adult kids now, all having a different opinion on how she ought to be cared for and where she ought to be cared for and just all of that is having long-term care insurance.

And the money aspect of it is when you cut through it, that was a lot of the issue between all of us. But my mother was fine during all this. She enjoyed the company. She enjoyed the people she met at the place. I think, to some degree, she enjoyed her invisible people. And she had Alzheimer's, right? Yeah.

Oh, yeah. I mean, but she was basically happy. She liked the food.

She probably couldn't taste it very well, but she liked the whole experience of the assisted living. I mean, it just, and then the memory care and, I mean, the people that bore the burden of this thing were us. I mean, we're all of the adult children and the ones that didn't live in the area who couldn't do much, they were feeling guilty because they weren't seeing her all the time.

And the ones that were here, you know, we had our own burdens with it. But all that being said, money was not a huge issue. And it would have been without insurance. We were able to get her on veteran's aid and attendance because she was a veteran.

She served as a Navy nurse. So I think you bring up a great point here, Robbie, is that long-term care insurance and life insurance, for that matter, have a, they're inappropriately named because they're not for you. They're for the people that are around you that love you and that are going to go through some very traumatic circumstances when you get sick. So, and I do want to get the show on the track of where we're going here, is I'm doing a presentation that's going to be a couple hours long to about a thousand CPAs and estate planning attorneys, where they're going to get continuing education credit, which they have to do.

Some of them want to do that. And the topic is long-term care insurance, and I'm writing out the outline for it. And so in the process of this, I'm going to be showing them examples for 65-year-old people, really along the lines of all the shows and the YouTube videos that we've done, to just show them what is available, what sort of tools and resources that I have. And so what happened about 20 years ago, or not quite 20 years ago, but about then, is the IRS and the tax law made available through the Pension Protection Act, where you could, as an owner of a life insurance policy, you could collect benefits, or your death benefits while you're still alive, early, as long-term care, for long-term care benefits, and it's tax-free.

So the road was paved for that. I'm oversimplifying it, but when that happened, then it enabled the life insurance industry to use its creativity, and the long-term care insurance industry, to create a life insurance policy, slash long-term care policy, that's a hybrid, that will pay if you need long-term care. It's just going to pay your bills, pay you a set amount per month, it's going to pay you for several years if you're needing care, and if you die after several years of needing care, well, then there's probably not going to be any life insurance benefit out of the thing. It's just purely been a long-term care policy. But then if you back up and you say, okay, so I'm going to use it as a long-term care policy, but I'm just going to use it for a short period of time, and then I pass away, well, then there's going to be a very substantial life insurance benefit that's going to go to my family, okay?

So it's, in effect, reimbursing them for the money I stuck into this thing. Right, and really at the heart of today's show, to some extent, is there's a spectrum of that kind of thing, that since they are a mixture of a life insurance and a long-term care insurance, that there's some that lean more towards a life insurance policy that kind of seconds healthcare, right? And there's others that really are more long-term care policy that, oh, yeah, there is a death benefit. But interestingly, like you said, the insurance companies, through their creative abilities, created this spectrum.

Yeah, and when I'm talking to all these accountants, I just found this spectrum that came from the CLTC, which is an organization that I belong to, certified in long-term care. And it just has, at the left end of the spectrum, a pure traditional long-term care insurance policy. There are no death benefits. You pay the premium, you need long-term care, you need it for a long time, it'll be the best decision you ever made.

You're going to get way ahead of the policy and you're glad you have it. Now, if you buy that and you never need it, which there's lots of people buy this long-term care insurance, and then they pass away, never using it, there's no benefit goes to anybody. I mean, it's just like any other insurance, if you don't have a loss, you got no claim. That's pure long-term care insurance.

That's on the left side of the spectrum. If you go over to the other end of the spectrum, you've got life insurance that really isn't designed to pay for long-term care insurance, but most modern life insurance policies have a chronic illness benefit on them so that if you need it and you need care, you can get something of your death benefit early. Now, I caution you to say, oh, I'm good, I got life insurance.

That's on there. Well, you need a pretty large life insurance policy for this thing to be able to kick out enough money to pay for long-term care. That really needs to be designed and it needs to be a very modern life insurance.

It needs to be, you just bought it in the last few years, because years ago, these things weren't included on there. So that's out at the other end of the spectrum, is the almost pure life insurance policy that, oh, by the way, has some long-term care benefits. And then everything in between are all the different categories or they've categorized all the different policies and offerings that are, are they stronger in the long-term care benefit or the life insurance side?

And that's, you know, so we're trying to explain a chart over the radio and that gets a little bit difficult. So let's just get back to the concept and why it matters. Every time I write that check for my insurance that is going towards this concept, you know, I'm thinking this doesn't have to do with, you know, I'm not writing this check because I'm looking forward to the care. I'm writing this check because I do not want my family to have to struggle with some of the things that we struggle with. And yes, I want to stay at home and get care. And yes, I want to live my life as pleasant as I possibly can. But I realized that there are ramifications of family that I know they'll take care of me to the extent of come visit me and that kind of thing. But, you know, there's things that really families are much better off being the visitors and supervisors and helpers, right?

Dr. Justin Marchegiani Sure. And so, of course, we got a whole lot more we're gonna share with you on information that I didn't know really, you know, some of the different nuances that we're gonna get into later into the show today. And of course, all those resources are there at the long term care tab at cardinalguide.com, which is who brings you this show, cardinalguide.com, as well as the show notes in this chart that we're talking about. It's all there under the long term care tab at cardinalguide.com as well as Hans' book, The Complete Cardinal Guide to Planning for and Living in Retirement.

We'll be right back with a lot more. Investment Advisory Services offered through Brookstone Capital Management LLC, abbreviated BCM, a registered investment advisor. BCM and Cardinal Advisors are independent of each other. Insurance products and services are not offered through BCM but are offered and sold through individually licensed and appointed agents. Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency. Welcome back to Finishing Well with Certified Financial Planner Hans Seil and today's show, Long Term Care Life Insurance.

Wow. That's a different, that's kind of a hybrid thing and we're getting right into, you know, what would be the benefits of some types of these policies versus others today, right? Well, I think the best way to understand is like, why do we have a spectrum? Why aren't these things all pretty much the same? And traditional long-term care insurance from company to company is pretty similar, okay? And so when we're just talking insurance against one thing, which is home health care, assisted living or nursing home care and a daily benefit or a monthly benefit in a number of years, sure, they're very similar.

Okay? But you get into all these other products that involve life insurance, you're thinking, well, why do we have these? Well, on the one hand, they're to try to make this long-term care insurance more attractive to the consumer so that they can look and they can see that they can get several benefits. They also, is traditional long-term care insurance, so let's just start there, let's just start there, is a traditional long-term care policy.

There's incidentally only about 10 companies on the market and we sell primarily for three of them and they're very similar. They have their reasons, we use different companies, but they all have difficult health underwriting. So they're not going to issue one of these policies on you if you've got, you know, a chronic illness and you've got some real issues kind of brewing with it. You know, they're going to issue most, if you've just got one chronic illness and you've got it pretty well under control, they're probably going to issue one of these policies.

But if you've got any problem where it's just been recently diagnosed, it's not under control well, you've got comorbidities as they call it, you've got a few things going on, a few different chronic illnesses, this is the hardest policy to get because you're just buying pure insurance and they're going to look at you and decide whether they're going to take you or not. It is the least expensive way to buy a policy because you're not paying for anything but the ability to file claims in the future and they don't owe you anything after you die because there is no life insurance on this. Right, and they may never have to. Right.

Inflation benefits are the easiest to calculate in price. And, you know, it's just it's what's been around and sold for 30 or 40 years. It's much different and much better than it was 20, 30, 40 years ago. And it's also much more expensive. And so once people start looking at putting the size and the amount of money into these things, they really get some questions and especially people that have money. And like I said earlier, then you've got the advent of the hybrid life long-term care policy.

And so as we go across the spectrum, we get over at the other end of the spectrum. And what we basically have is a pure life insurance policy that also has a long-term care benefit on it if you need it. And a lot of people that even have this benefit for long-term care on their life insurance don't even know they have it.

I mean, it's just something that's packaged in there. And it's really not costing you a lot of money. It'll cost you money if you use it for long-term care because they're going to build their cost into their benefit payment, which will be short of the full amount of your life insurance. So we don't sell that much of that and call it long-term care insurance because it's certainly not. Actually, the product in the category on this chart that we sell the most of is the linked benefit life insurance and long-term care insurance that has an extension rider on it.

Now, that's a whole mouthful. But I showed as an example is a $250,000 policy that is going to spread your benefits out over three or four years. So if you took 250,000 and you divided it by four, that's 62,000 a year. So in other words, if you have a $250,000 death benefit and it's paid out as long-term care over four years, you're going to get about 5,000 and change a month.

If it's paid out over three years, you're going to get in the 70,000 something, actually more than 80,000. So that's all they're simply doing with a quarter of a million dollars of life insurance is they're just paying it out early to you if you needed it sooner than death for long-term care benefits. And that's why you need the extension rider. That's why you need the extension rider. And then the extension rider typically extends the benefits so when your life insurance benefit is all used up for paid out and long-term care, then you've got this rider that keeps on paying about as long as it paid to it.

So like for another three years or four years. That's the kind that we sell the most. And most people buy that with a single premium. They just take a chunk of change, either IRA money, so you can buy those with IRA money with one company. So you can take, you know, for a couple, a couple of $100,000 worth of IRA money and stick it in their cover, both of you, and it creates a $250,000 life insurance policy. And then it has an extension rider for lifetime that if either one of you needed it for the rest of your life, it's going to pay.

I mean, that's an oversimplification. Well, just think about it from a tax, you know, where I guess a practical standpoint, really, because if you got a big IRA out there, right, and you know that at some point in time, somebody's going to have to pay some taxes on that income. But by rolling it into a life insurance policy, like, correct me if I'm wrong, that, you know, you can do that without having to pay on the income like you would a normal payout.

Okay, and there's a couple of quotations because you got it directionally right. But the way we actually do that, if we had $200,000 in your 401k or in your IRA, we would roll it from there into an IRA account at the life insurance company. Right. So it's a custodian to custodian, then we take the 200 grand, and that's going to spit out 25 grand a year into the life insurance over 10 years, that will be taxable. So there is a, you know, the IRS is going to get their taxes on their IRA, but it'll be at the tune of 25 grand a year for 10 years. And then ultimately, it is now in the life insurance long term care policy. And that, if you die, without using much of it, or any of it for long term care will be a tax free benefit to your heirs.

Right. But as many people, including my father would have told you, you know, what's this IRA money for? Oh, it's for my kids. Well, if it's for your kids, you know, and, you know, you know, to have one of these hybrids is to say, Okay, you know, if I get sick, I know my kids are not going to have the level of responsibility, nor the level of grief and mourning later, through through what happened through my care.

And oh, if I died suddenly in a car accident, boom, it's a it's a life insurance policy. And they do get it. Right. And so you know, what a cool thing, really, from my standpoint, because both things we're talking about are really for families.

Well, they absolutely are. And that's our most popular, what I just described, there's a whole bunch of different companies and different methods, you don't have to pay it in a lump sum, you could pay it over 10 years or 12 years, or there's all kinds of options and things we do in financial plans. But I do want to go over the next level is we have annuities that are easier to qualify for than the long term care life insurance.

So we don't have time today to go into why they're easier. So let's just understand they're easier to qualify for. So we have some people who couldn't get the long term care life insurance, but they can get the long term care annuity, and the extension rider that comes with it. So that is just very important.

We have one of those that has no qualification. And then we get out to the spectrum, we have some people that have a need for a large amount of life insurance, and they they're going to need that for the rest of their life. They're somewhat opposed to paying premiums for long term care insurance, or very opposed to it. But they're up for buying life insurance. And then inherent in the life insurance are some long term care benefits that if they ever end up needing long term care, they're not going to use up the whole life insurance because the policy is too big and it's going to shoot out the appropriate amount of money to pay for their care. And it's a good arrangement for certain people. We as a percentage of our business, it's less than 10% of our new customers coming in with the policies at the end of the spectrum. And beyond the spectrum that we have here, we have a few other products that we work with. One of them is short term care recovery care insurance, which is going to pay for one year in a facility or assisted living, and one year at home, some pretty substantial benefits. The price is not is very reasonable on it. And it's fairly easy to qualify for.

And so we have a lot of people that hop that. And then we have annuities that are really designed for income. So they're not designed for long term care benefits as a primary benefit. They're designed to start a future income that continues for life. And they have an enhancement or a doubler feature that if you would need long term care, have chronic care, you know, you meet the qualification, the income doubles for several years. So there's a way for people with illnesses that have a need for future income, and they've got some unmarked money that we can finagle that. And we do that for a lot of people who are either in poor health, and they can't qualify for the regular stuff, or people that just, they're just not paying premiums for this stuff.

They're just not doing it. But the payouts on those annuities are strong enough. And then it's Oh, by the way, you got a doubler for long term care, so that if they ever do need it, they're they're going to be very glad that it's there. And I think one thing we got to talk about before we close is that the sooner you make these decisions in life, right, the less expensive the premiums are, you know, if you wait till, oh, now you're 75. And all these things, you know, but, but if you know, wow, I want to make this plan for my family. And I want I do want to, you know, face the fact that many, many, many people are going to need some type of long term care. And to make that decision earlier and put it in your financial plan would would certainly be a good investment of time and money, right? Oh, it absolutely is.

And we put it in every financial plan that we do. And just because it's that important, the sooner the better, even in your 30s or 40s. Believe me, it's something that we all are going to face.

So, again, not enough time too much show. But of course, all this stuff is available at Cardinal guide.com under the long term care tab and also under life insurance tab. And of course, you know, a cardinal guide is where you can get up with Hans because I know everybody's situation is different.

And, you know, you got different relatives and different care that's needed. So don't hesitate. That's where you find him cardinal guide.com.

Of course, Hans Shile, his book, The Complete Cardinal Guide to Planning for and Living Retirement is also there. But we're just grateful that you would spend time with us today and good show Hans. Yeah, thank you.

And God bless you. The opinions expressed by Hans Shile and guests on this show are their own and do not reflect the opinions of this radio station. All statements and opinions expressed are based upon information considered reliable, although it should not be relied upon as such.

Any statements or opinions are subject to change without notice. Investments involve risk. And unless otherwise stated or not guaranteed, past performance cannot be used as an indicator to determine future results. Any strategies mentioned may not be suitable for everyone. Information expressed does not take into account your specific situation or objectives and is not intended as recommendations appropriate for you. Before acting on any information mentioned, please consult with a qualified tax or investment advisor to determine if it's suitable for your specific situation.

Finishing Whale is designed to provide accurate and authoritative information with regard to the subject covered. Investment Advisory Services offered through Brookstone Capital Management LLC, abbreviated BCM, a registered investment advisor. BCM and Cardinal Advisors are independent of each other.

Insurance products and services are not offered through BCM but are offered and sold through individually licensed and appointed agents. Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency. We hope you enjoyed Finishing Whale, brought to you by cardinalguide.com. Visit cardinalguide.com for free downloads of this show or previous shows on topics such as Social Security, Medicare, IRAs, long-term care, life insurance, investments, and taxes, as well as Hans' best-selling book, The Complete Cardinal Guide to Planning for and Living in Retirement, and the workbook. Once again, for dozens of free resources, past shows, or to get Hans' book, go to cardinalguide.com. If you have a question, comment, or suggestion for future shows, click on the Finishing Whale radio show on the website and send us a word. Once again, that's cardinalguide.com. Cardinalguide.com. This is the Truth Network.