Add a hybrid life insurance product with a long term care rider in RetireUp.
Begin at the sources tab on the left side of the client's plan. Select the Insurance tab at the top. Use the drop downs to complete the insurance plan and continue.
The insurance premiums will automatically be added to the expenses tab and the "salary will fund before retirement box" will be checked. Also notice that the expenses end at first LTC event.
If this expense should be funded by a specific non-qualified asset, be sure to uncheck the "Salary will fund before retirement" box and check the asset box that will fund these expenses. In this example, they have chosen a $10,000 10-pay plan funded by their Chase savings account.
Next you will add a hypothetical LTC event under the expenses tab. You can select In-Home Care, Assisted Living Care, or Facility Care for the LTC event. This example gives Pete a yearly $100,000 LTC benefit with a 5% inflation rider. He will be in a facility for 3 years and then pass. Any of these expense types "In-Home Care, Assisted Living Care, and Facility Care" will automatically be funded first by a LTC insurance plan, as long as a LTC plan is added under the insurance tab. The inflation rate defaults to 5%. Inflation begins now on this expense so the $100,000 expense will grow to $207,893 at age 70 when he goes into the facility.
On the plan tab>timeline>cash flow, you can see the increased cash flow due to the LTC event, followed by his passing and the expenses dropping. Below the timeline, the LTC tab is also selected showing some details:
Death benefit - the total benefit paid at the death of the owner less the LTC expense benefit paid prior to the owner's death.
LTC benefit - the percentage of the death benefit that is available to pay for LTC healthcare expenses per month. For example, if the DB is $500,000, a 2% LTC benefit payment option would provide $10,000 per month for LTC expenses until the LTC percentage of total benefit value is met.
LTC percentage of total benefit - the amount of the DB that can be used for LTC expenses prior to the death of the owner. For a policy with a $500,000 DB and a 60% LTC percentage of total benefit would allow the client to use up to $300,000 in total LTC benefit which would reduce the DB dollar-for-dollar leaving $200,000 for the client's heirs upon death.
Switching from the timeline to the all years tab and hovering your cursor over the year he goes into LTC, the goal will be broken down into the various expenses. You can see their after tax income need as well as the impact of 5% inflation on $100,000 over a 15 year period.
Changing the view from cash flow to balances, you can see a $200,000 contribution. This a $200,000 death benefit upon him passing.
Unchecking the Assisted living expense box and moving the life expectancy out to age 85 will convert this hybrid product into a pure life insurance policy leaving a $500,000 death benefit (see the $500,000 tax free contribution the year after his passing).