LTC Alternative --- GUL + Reverse Mortgage

[J2727]

Yes, regular or hybrid LTC is best, but some people simply won't get any kind of LTC insurance.

LTC options

- regular LTC
- hybrid LTC; also has a death benefit (bigger LTC benefit, smaller death benefit)​

LI alternative

- GUL/Whole Life policy with an accelerated death benefit or LTC rider (which I know most don't consider it true LTC coverage).​

Annuity alternative

- FIA + income rider; can double the payout for several years, which would help in case of a LTC event
- LTC annuity; 3-4x the principal to be used for LTC costs if needed​

GUL + Reverse Mortgage alternative
However, wouldn't another alternative be the following:

- Reverse mortgage, line of credit; let it grow for years, compounding the interest rate
- The money can then be used as needed if/when LTC is needed

- GUL; to leave money to kids; if reverse mortgage money is used, there's less equity in the house to leave behind; so the GUL is to "protect" the inheritance of the children
- This assumes they can qualify for life insurance. It's best to do it younger obviously (before 62, the age they can get the RM line of credit).
- Final expense could be used, but the death benefit amount would be less even if using multiple policies.

- In this case, the premiums being paid have a definite result: the death benefit of the GUL.
- This can satisfy the issue that people have with paying premiums for LTC (if they don't use it, it was for nothing).

- If they don't need the LTC, the kids get the GUL and the house full of equity (no reverse mortgage money used).
​

Anyway, the point is that this is another alternative to help clients prepare for LTC costs.
Some people simply will not get any kind of regular LTC coverage.

So, these alternatives (the annuities and GUL+RM) can also be used.

What do you think?

 

[Mr_Ed]

Yes, regular or hybrid LTC is best, but some people simply won't get any kind of LTC insurance.

Why not just do a better job explaining to people the advantages of long-term care partnership policies?

 

[J2727]

Why not just do a better job explaining to people the advantages of long-term care partnership policies?

True, but again, some people simply won't do it. It's almost like they're philosophically opposed to it.

Also, many people can't ever see themselves needing LTC.

It's good to have options and be able to help the client in different ways.

Using one of the alternatives still allows them to leverage their money for LTC purposes.

 

[J2727]

I forgot to mention there are short-term plans too.

However, not all states offer them. Florida doesn't.

 

[Allen Trent]

True, but again, some people simply won't do it. It's almost like they're philosophically opposed to it.

Also, many people can't ever see themselves needing LTC.

It's good to have options and be able to help the client in different ways.

Using one of the alternatives still allows them to leverage their money for LTC purposes.

Those same people that you say wont do stand alone LTC plans are also likely the same people that would pay all the costs associated with a reverse mortgage or GUL if the details are shared with them. Maybe some would, but I would think you have a better chance to properly educate on stand alone LTC or hybrid than to go the routed or reverse mortgage if they dont have an income need from the equity in the house. I have always considered reverse mortgages to be the last resort for those with an inadequate income issue

 

[Tothetop]

Why even sell them insurance? Get them while they are young and tell them to save and invest the rest...you see the direction you are going in?

 

[J2727]

Those same people that you say wont do stand alone LTC plans are also likely the same people that would pay all the costs associated with a reverse mortgage or GUL if the details are shared with them. Maybe some would, but I would think you have a better chance to properly educate on stand alone LTC or hybrid than to go the routed or reverse mortgage if they dont have an income need from the equity in the house. I have always considered reverse mortgages to be the last resort for those with an inadequate income issue

You're correct, the reverse mortgage is a last resort for people with an income need. They could pull money little by little with the line of credit (which grows over time too) or they could use the tenure option and get income for life.

However, in my LTC alternative strategy, there would be no income need for the client. It would simply be another alternative if the client refuses to pay for LTC insurance.

They would still utilize leverage with the GUL combined with the reverse mortgage.

The premiums they would pay for the GUL has a definite outcome (the larger death benefit). And then only use the reverse mortgage growing line of credit if they need LTC.
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Some people won't pay for LTC insurance. So there must be alternatives for these people to cover LTC costs and protect their assets.

And state partnership programs won't work either. Again, they have to pay for the LTC insurance. Also, the whole point is to stay home when you need LTC, not go to a nursing home, which is where you have to be if Medicaid is to pay for your LTC.

Even if the government would fully cover LTC, who cares? You have to be in a damn nursing home for that. Nobody wants that.

 

[J2727]

Why even sell them insurance? Get them while they are young and tell them to save and invest the rest...you see the direction you are going in?

No, I don't see the direction you're talking about.

Even if someone has substantial assets, they should still utilize some leverage to cover potential LTC costs.

Self-insuring is foolish, even with substantial assets. They wouldn't self-insure their home, cars, etc.

Beyond LTC insurance, there must be alternatives for people won't get LTC insurance for whatever reason.

Every strategy I listed outside of LTC insurance still utilizes some leverage. The client would be better off using any of those strategies as opposed to not having any LTC plan at all.

 

[Tothetop]

No, I don't see the direction you're talking about.

Even if someone has substantial assets, they should still utilize some leverage to cover potential LTC costs.

-So sell them LTC insurance

Self-insuring is foolish, even with substantial assets. They wouldn't self-insure their home, cars, etc.

-So sell them LTC insurance

Beyond LTC insurance, there must be alternatives for people won't get LTC insurance for whatever reason.

-Not everyone will qualify for LTC insurance, not everyone can afford LTC insurance, AND not everyone will want LTC insurance. It's a reality of life.

Every strategy I listed outside of LTC insurance still utilizes some leverage. The client would be better off using any of those strategies as opposed to not having any LTC plan at all.

- The client would be better off buying LTC insurance

 

[Allen Trent]

You're correct, the reverse mortgage is a last resort for people with an income need. They could pull money little by little with the line of credit (which grows over time too) or they could use the tenure option and get income for life.

However, in my LTC alternative strategy, there would be no income need for the client. It would simply be another alternative if the client refuses to pay for LTC insurance.

They would still utilize leverage with the GUL combined with the reverse mortgage.

The premiums they would pay for the GUL has a definite outcome (the larger death benefit). And then only use the reverse mortgage growing line of credit if they need LTC.
-----
Some people won't pay for LTC insurance. So there must be alternatives for these people to cover LTC costs and protect their assets.

And state partnership programs won't work either. Again, they have to pay for the LTC insurance. Also, the whole point is to stay home when you need LTC, not go to a nursing home, which is where you have to be if Medicaid is to pay for your LTC.

Even if the government would fully cover LTC, who cares? You have to be in a damn nursing home for that. Nobody wants that.

So, are you saying your strategy would be to encourage them to deplete the equity in their home(a Medicaid protected asset) to buy GUL( a non protected Medicaid asset). Even with the Medicaid asset issue, wouldn't they eventually be in bad shape long term as the reverse mortgage loan amount compounds but the GUL evaporated the little cash value it may build? Then, could the surviving spouse be able to afford the ongoing GUL premium if they were the one insured but didn't die? I am open to lots of strategies, just not following this one or figuring out the unicorn it may apply to