HEALTH WON’T ALLOW FOR EITHER LONG-TERM CARE OR LINKED BENEFIT INSURANCE? LINK HOME EQUITY TO AGING IN PLACE
As a financial planner, you understand that one of main budgeting challenges your clients will face as they enter into retirement will be related to health costs. With that in mind, while you are not yourself a licensed insurance agent, you have begun to systematically refer clients to knowledgeable long-term care insurance colleagues.
For those of your clients in their sixties who have the wherewithal to “pre-fund” long term care insurance while still preserving assets for their beneficiaries, you recommend they look into linked-benefit policies. (True as some of your colleagues have pointed out such a large prepaid premium commitment can divert client assets from investment accounts you would otherwise be managing. But, with the intention of remaining active in your financial planning practice for decades to come, you must put clients’ long-term benefit ahead of your own interests.)
The problem you’ve described that arises for some of your clients is health-related, rather than a matter of affordability. While linked-benefit, or hybrid long-term care because the underwriting is focused on the life insurance aspect along with the long-term care aspect, may have less stringent health requirements than traditional LTC, health issues may indeed disqualify some.
First, you are certainly to be complimented for continuing to educate yourselves on long-term care insurance options on behalf of your clients. The escalating costs of senior care, whether in the form of home care, assisted living, or nursing home care, pose an enormous retirement planning challenge. That challenge is even more daunting for those unable to qualify for LTC insurance coverage. It will become important for many to consider using the equity built up in their home as the “insurance” element in their retirement plan, in the form of a HECM reverse mortgage set up as a line of credit.
With a government-backed reverse mortgage, so long as your clients continue to occupy their home, taking care of home maintenance costs, taxes, and insurance, no monthly mortgage payments* would be required. Monies withdrawn would be non-taxable, while the unused portion of their equity would grow at the same rate as that being charged on borrowed funds. Since by definition, a reverse mortgage represents a non-recourse loan, heirs would never be left owing any money to the lender.
When LTC insurance options become unavailable to clients, “linking” their home equity to their potential future need for long term care can be the key to “aging in place.”
https://mutualreverse.com/david-garrison
*Borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees. David Garrison, NMLS ID 1595194. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Indiana-DFI Mortgage Lending License 43321. Michigan 1st Mortgage Broker/Lender/Servicer Registrant FR0022702. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to credit approval. For licensing information, go to: www.nmlsconsumeraccess.org
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