Don’t let the cost of long-term care insurance dissuade you from talking to clients about this essential coverage. The two greatest financial fears of retirees are 1) being unprepared for health care costs in retirement and 2) outliving retirement income. Long-term care insurance addresses both fears. There are many ways to make long-term care insurance affordable. Shared care benefits offer the potential for an extended benefit period while keeping the policy premium affordable.
Share care benefit explained
Couples, married, same-sex, and unmarried partners, have options available to reduce total premium paid while extending the total benefit pool if both hold identical policies. The benefit is triggered when one spouse exhausts the benefits under his/her plan while the other spouse’s plan has benefits remaining, in effect extending their long-term care protection. Most carriers offer a shared-care benefit rider that can be added to both policies. Riders of this type usually add 15 percent – 30 percent to the base plan premium.
The optional rider varies by carrier and sometimes by product. All riders extend the individual benefit pool by providing access to an alternate benefit pool. How that is accomplished is usually one of two methods:
- Method 1: allows couples to access one another’s benefit pool.
- Method 2: rather than accessing the other party’s benefit pool – method 2 establishes a third benefit pool that either person can access without reducing each other’s benefit pool.
Method 1 example:
Each person has a policy with a three-year benefit with a $150 daily benefit. That represents a benefit pool of $164,250 ($150 (daily benefit) x 365 (days) x 3 (benefit period years)) per person. In this example one party uses two years of benefits or $109,250. When needed, the second party has access to a four-year benefit of $219,000, the three-year base policy benefit plus the remaining year from the first party’s policy.
Method 2 example:
Two insured living in the same home, apply for a joint policy with the base plan period of three years and a daily benefit of $150. The couple decides to add a shared-care benefit rider. In this example, the benefit provides for a third benefit pool that is of equal value to the two individual benefit pools. Just as above, each individual has a benefit pool of $164.500 ($150 (daily benefit) x 365 (days) x 3 (benefit period years)) plus access to a third pool of $164,500. If one of the insureds exhausts the benefits provided by the base plan, the third benefit pool, can be accessed for extended coverage. The advantage is the second party has access to the full benefit amount provided by the base plan.
Within the DIS product portfolio, both methods of shared benefit riders are available. Your representative can help you choose the shared care benefit and base plan policy that works for your client. We will help you customize long-term care insurance plan with varying daily benefit amounts, benefit periods, and other optional riders to make long-term care insurance affordable for your client. Call us today for a quote or just to learn more about offering this essential coverage to your clients.