The Long-Term Care Annuity

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

What Is A Long Term Care Annuity

A long-term care annuity is an insurance product designed to cover the expenses associated with long-term care services. It offers a combination of annuity and long-term care coverage, providing financial protection in case of extended healthcare needs. With a long-term care annuity, individuals can adequately meet their future care needs while earning potential investment returns.

70% of people age 65+ will need long-term care (September 2008). – U.S. Department of Health and Human Services.

How Does A Long-Term Care Annuity Work

A long-term care annuity is an insurance product that helps cover the costs of extended care services in the future. By purchasing the annuity, individuals receive regular payments to fund their long-term care needs. These annuities allow policyholders to protect their assets and access care when needed, providing financial stability and peace of mind.

Key Takeaway: Basically, these alternatives to traditional long-term care insurance double (200%) or triple (300%) your initial single premium payment (based on medical records) to generate a tax-free long-term care insurance benefit.

Long Term Care Annuities

Long-Term Care Insurance Vs. Annuity

FeatureLong-Term Care InsuranceLong-Term Care Annuity
PurposeSolely for long-term care costsSolely for long-term care costs
PremiumsRegular paymentsOne-time lump sum
TransferableNot Transferable To BeneficiariesTransferable To Beneficiaries.
EligibilityHealth screening requiredPhone Interview/Medical Background Check
Best Long-Term Care Annuities

LTC Annuity Vs. Annuity With LTC Rider

Long-term care (LTC) Annuities and Annuities with Long-Term Care Riders serve different purposes and cater to distinct financial needs.

  1. LTC Annuities:
    • Primary Purpose: Specifically designed to cover long-term care expenses.
    • Suitability: Ideal for individuals whose primary concern is paying for long-term care costs. This could be due to a higher risk of requiring such care or a desire to protect other assets from being used for these expenses.
    • Benefits: LTC annuities typically provide more substantial benefits specifically for long-term care needs than riders attached to standard annuities.
    • Costs and Payouts: The focus is more on long-term care benefits than retirement income.
  2. Annuities with LTC Riders:
    • Primary Purpose: These are standard annuities with an added feature (rider) for long-term care. The primary goal is to provide retirement income, with long-term care benefits as an additional component.
    • Suitability: This plan is best for individuals primarily concerned with retirement income but want the security of long-term care coverage.
    • Benefits: The long-term care benefit is an add-on, meaning it might not be as comprehensive as a dedicated LTC annuity.
    • Costs and Payouts: This plan focuses on providing a steady income during retirement, with the long-term care rider acting as a secondary benefit.
Long-Term Care Annuity

The Best Long-Term Care Annuities

The best long-term care annuity providers include:

Annuities With Long-Term Care Riders

Next Steps

In conclusion, long-term care annuities emerge as a financially savvy strategy for managing the costs associated with long-term care. By effectively reducing these expenses to as little as half or one-third, they offer a tax-free solution for individuals planning for their future care needs. Furthermore, these annuities ensure financial security during one’s later years and provide peace of mind, knowing that any remaining balance will be seamlessly passed down to beneficiaries in a lump sum. This dual benefit of cost reduction and inheritance protection makes long-term care annuities an attractive and prudent choice for those seeking to safeguard their financial legacy while addressing the potential costs of long-term care.

What Are Long-Term Care Annuities

Long-Term Care Annuity Quotes

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Questions From Our Readers

Can I add a spouse to a long-term care annuity?

Yes, most long-term care annuities allow to insure both spouses on one policy.

Do I have to take a medical exam for long-term care annuities?

No. Most LTC annuities require a phone interview and a medical history check only.

What’s The Minimum Amount To Buy A LTC Annuity?

The minimum amount typically needed to buy a Long-Term Care (LTC) annuity is around $35,000. This figure can vary based on the provider and the specific terms of the annuity, such as the coverage options and the age and health of the individual purchasing it.

Does someone 83 qualify for a long-term care annuity?

No. There are alternative options, such as simplified-issue life insurance policies with long-term care riders. These policies can offer a way to obtain some long-term care benefits and life insurance coverage.

Is a long-term care annuity tax-free?

A significant benefit of these annuities is their tax-friendly nature under certain conditions. They are tax-free if you use the benefits from your long-term care annuity specifically for long-term care expenses. This is because the IRS recognizes these expenditures as essential medical expenses. Here’s an important distinction: an annuity with a long-term care rider does not enjoy the same tax-free status. The reason is the absence of a reimbursement model. In these cases, the annuity provides additional funds if you need long-term care, but these are not directly linked to reimbursing specific expenses. As such, the benefits received from these riders are subject to taxation.

Can you 1035 exchange annuity for long-term care?

Yes, you can use a 1035 exchange to transfer a nonqualified annuity tax-free into a long-term care annuity, providing an efficient way to plan for long-term care needs.

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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