Annuity Hybrid with LTCi Extension

By Marc Glickman, FSA, CLTC, CEO and co-founder of BuddyIns.

As financial professionals, navigating the dynamic world of long-term care solutions has never been more critical, especially for an aging clientele keen on maximizing their assets. What product might be advantageous for Medicare clients who have assets that could be repositioned and who need coverage options to address long term care needs not covered by standard Medicare plans?

With the increasing popularity of annuity hybrids paired with LTCi extensions, a modern approach to long-term care planning emerges. This solution blends flexibility, tax advantages, and accessibility. Read on to learn why these innovative products are transforming long-term care planning for clients over 65. For clients who have more assets, an annuity + LTCi hybrid may be a solution to consider. Whereas the pricing of life hybrids can get relatively expensive at ages 65 and older, the pricing of annuity hybrids does not increase as much with age. The underwriting process for annuities is much less stringent with a page of knockout questions rather than the full underwriting that life hybrids often require. While there are not as many carriers offering annuity with true LTCi riders, the ones that offer the product are growing quickly in popularity.

Here are a few reasons why annuity products fit especially well for clients who are 65 and older:

1. They often have more readily available assets or cash equivalents that can be used to fund the single premium solution.

2. The immediate LTC insurance leverage can be 3x or more of the initial deposit, which compares favorably to traditional LTCi and life insurance hybrids at these ages.

3. The underwriting is designed for clients at these ages, and there's even a carrier with a guaranteed issue option should they not qualify for the best health rating.

4. Clients who already hold a non-qualified annuity can utilize a tax-free 1035 exchange to transfer the cash value into an annuity with an LTCi rider.

This allows the gains from the existing annuity to be excluded from taxation as ordinary income when allocated to the tax-qualified LTCi rider.

While not true LTCi, there are also fixed indexed annuities with ADL doublers that create additional income if the client meets the two out of six ADL eligibility trigger. A few of these products have expanded to cover home health care in addition to facility care. Carriers are seeing these features differentiate their FIA offerings. The true LTCi rider products have the added advantage of tax-free benefits.

Case Story: Repositioning Assets to Create LTC Planning Leverage

Steve had significant savings in cash, but he wanted a solution that would provide long-term care leverage without draining his assets. After consulting with a financial advisor, he discovered the annuity hybrid with LTCi extension—a product designed for individuals like him. Unlike traditional life hybrids, which become costly at his age, the annuity hybrid offers stable pricing and less stringent underwriting.

The Challenge

Steve had always been independent, navigating life with confidence. At 65, he found himself facing a new challenge— his health had begun to slow him down, and simple tasks like dressing and bathing required assistance. With no immediate family nearby, he worried about the financial strain of hiring professional caregivers.

Client Profile:

• Male age 65

• Health: Moderate, with a few chronic conditions that are progressing

• Financial: Significant savings in cash, which are able to be repositioned for long term care needs

• Coverage: Medicare Supplement, which doesn't cover LTC needs

Annuity Hybrid Funding Solution

After consulting with a financial advisor, he discovered the annuity hybrid with LTCi extension—a strategy designed for individuals like him. Unlike traditional life hybrids, which become costly at his age, the annuity hybrid offers stable pricing and less stringent underwriting.

With a single premium deposit of $100,000, Steve secured up to $8,792 per month for five years of home health, assisted living, or nursing home care. The indemnity benefit allows him to use the funds as needed, ensuring he could receive quality care without financial stress. Even better, he had the option to 1035 exchange his existing annuity, making the transition tax efficient

Value Proposition: Annuity Hybrid with LTCi Extension

Chart created using Benefit Buddy

Outcome

As Steve settles into his new care plan, he feels a sense of relief—his future is secure, and he can focus on enjoying life and getting the help he needs without worrying about the unexpected.

Annuity with LTCi Riders vs. Life with LTCi Riders

For the above client, this annuity with LTCi rider provides up to $8,792/month for five years of home health, assisted living, or nursing home care paid as an indemnity benefit. It’s competitive with a life-based hybrid policy, but with less strenuous underwriting. This product even has a guaranteed issue alternative should the client not qualify based on health.

Annuity Hybrid Breakdown

Sweet Spots:

• Available to clients of any health history (ages 55-80)

• LTC Leverage – two percent and five percent inflation protection and five-year benefit period available.

• Efficient Funding – Single pay and 1035 from existing annuity available.

• Indemnity Benefit – As long as you are receiving skilled care, spend your benefits how you wish.

• Partner Benefits – Some annuity hybrids with LTCi offer partner benefits, allowing coverage for two people under one policy, or for joint annuity owners to use their existing annuity value to fund a joint annuity LTCi plan that covers them both.

• More lenient underwriting – with guaranteed issue available. These plans are more accessible to those with pre-existing health conditions.

Product information available in the Buddy System

Sample Products:

• OneAmerica Annuity Care (Ages 40-85)

• Global Atlantic ForeCare Annuity LTC (Ages 50-80)

• EquiTrust Bridge (Age 55-80)

Publisher’s Note:

California Broker is pleased to have a collaborative relationship with Buddy Insurance, a leading long-term care insurance education, marketing and technology company. CEO Marc Glickman and his specialists will collaborate with health and life insurance professionals to help design LTCi options. Learn more about LTCi and refer clients — or learn how to write your own LTCi policies using Marc’s system.

CONNECT to Buddy Insurance LTCi PORTALS HERE:

Group: http://buddyins.com/program/calbroker/group Individual: https://buddyins.com/program/calbroker/

Access all of the LTC planning tools shown in this article, plus our new Ai Advisor, with a 30-day free trial to the Buddy System. Sign up at the Buddy System Agent Portal to design your own plans or review the products in detail.

Marc Glickman, FSA, CLTC is CEO and co-founder of BuddyIns, a leading long-term care insurance education, marketing and technology company. Marc is a licensed insurance agent in all 50 states and serves on the Board of Advisors for CLTC. Marc has over 15 years of experience as an actuary including as the chief investment officer and chief sales officer for a major LTC insurance company. Marc earned his degree in economics from Yale University. In 2019, he was named one of the top 20 innovators in the insurance brokerage space. marc@buddyins.com