Sales Idea: Buy Term + Invest the Difference…. in LTC Coverage

For someone that is pre-retirement age and starting to get serious about retirement planning and protection, there are a variety of planning strategies. One of those strategies is to employ a permanent life insurance policy with an LTC rider or Chronic Illness rider. It is a fantastic strategy to provide someone in their highest earning years, a little extra life insurance protection for income replacement or debt coverage, while including an LTC rider to transition the value of the benefit to LTC coverage after retirement. This is a growing and widely used strategy that is a great fit for many folks, however it may not be the best solution for everyone, particular for a client that doesn’t need additional permanent insurance. For the client that may just need a bit of extra life insurance protection through their working years, until retirement income kicks in, there may be a better LTC planning strategy.

Let’s take a Female, age 55, Standard non-tobacco rated, planning on retiring at 65 and beginning to take retirement income. She has some permanent life insurance already but needs a bit more protection for income replacement, should something happen to her in her final working years. She also does not have LTC insurance, and this risk needs to be accounted for as well. One strategy may be to buy a Permanent life insurance policy with a rider for her LTC risk. I’ve illustrated a common sale in this scenario, a $250K policy with a rider to provide acceleration of the death benefit down the road. I used a Securian Guaranteed IUL with Chronic illness acceleration rider, paid up over 10 years for $8,742 annually.

Alternatively I’ve illustrated a 10 year term policy (through her age 65 retirement) plus a SecureCare UL purchase, both funded over 10 years. The SecureCare policy premium is $6,845 annually and the Term is another $2,000 annually. This Term policy will provide nearly a million dollars of income replacement until she is retired vs. the $250K provided by the IUL. In addition, the SecureCare policy with 3% compound inflation, has a growing LTC benefit that totals $470K by her age 85.

For roughly the same total premium output annually, the Term + SecureCare idea provides quite a bit more in death benefit protection for her income replacement through retirement as well as a growing LTC benefit that far exceeds what the IUL would have provided by her potential LTC claim age.

I used Securian products to illustrate this idea but could certainly hold true across different carrier products. Securian’s Term does also offer an optional Chronic illness rider that could be added to the Term, if someone wanted to lock in insurability, they would have up to age 65 to convert to a permanent policy with Chronic Illness rider and potentially buy even more eldercare expense protection. This planning idea will also hold true using our new SecureCare III product once available at the end of the month.

Food for thought as you do the good work of helping folks plan to live their best lives in and through their retirement years!