Whether we’re buying a new car, planning a vacation getaway, or choosing a cellular plan, we Americans love having plenty of choices. And when it comes to financing long-term care costs, your clients have choices too.
As an insurance broker, you’ve probably been stressing the need for and singing the praises of long-term care insurance to your clients for a long time. You’ve cited the statistics – how 70% of Americans who reach age 65 will need long-term care at some point in their lives. You’ve told them how they can spare their families the financial burden and stress of having to pay for a loved one’s long-term care out of pocket.
But have you told them they can finance their long-term care insurance premiums with their Health Savings Account (HSA)?
Health savings accounts are becoming one of the most popular savings vehicles. And it’s easy to see why – they’re completely tax free, funded with pre-tax dollars and not subject to taxes at withdrawal, so they can be an excellent way to save for future medical costs. HSA funds can be used to pay for COBRA coverage, healthcare coverage while unemployed, Medicare, or other health coverage at age 65 or older.
HSAs are also a great way to help pay for long-term care costs.
With a “tax-qualified” long-term care insurance policy, anyone can use money from their HSA to pay a portion of the premiums, all tax-free. A long-term care insurance policy is considered tax-qualified if it pays benefits when the insured is unable to perform at least two activities of daily living (such as dressing and bathing) or when the insured has a severe cognitive impairment. Most LTCI policies qualify.
The amount an insured can withdraw tax-free to help pay for long-term care insurance premiums depends on their age. Here’s the breakdown on how much can be used from an HSA for 2014:
- Up to $370 if age 40 or younger
- $700 if age 41 to 50
- $1,400 if age 51 to 60
- $3,720 if age 61 to 70
- $4,660 if over 70
These amounts are adjusted annually for inflation.
Help your clients develop their long-term care insurance funding strategy
With the need for long-term care on the rise, the need for Long-Term Care Insurance will continue to grow too. And your clients want choices. Since HSAs are still relatively new, many people aren’t aware of their potential for financial planning. That spells opportunity for you to educate them.
When you’re ready to present a long-term care insurance quote, count on DIS to support you throughout the sales process. Ready to get started? Download our LTCi Broker Kit here or contact me for more information.