As healthcare costs rise, the need for long-term care (LTC) is a reality many Americans face. Unfortunately, traditional LTC insurance often falls short, with high premiums and a “use it or lose it” rule that leaves unused benefits wasted—putting savings and assets at risk.
Asset-based long-term care insurance offers a smarter alternative. By integrating the benefits of permanent life insurance, this solution safeguards your wealth, funds LTC expenses, and aligns with The Perpetual Wealth Strategy™. It allows you to build cash value, provide a guaranteed death benefit, and create a lasting legacy for your family—all while ensuring your care needs are met.
Curious about how asset-based LTC insurance can protect your assets and secure your family’s future? Let’s explore how this innovative approach transforms financial security and legacy planning.
What Is Asset-Based Long-Term Care Insurance?
Asset-based LTC insurance combines the protection of long-term care coverage with the benefits of permanent life insurance. Here’s how it works:
- If you need care, the policy allows you to access the death benefit while you’re still alive to cover qualified healthcare costs like nursing homes, in-home care, or hospice services.
- If you don’t need care, the full death benefit is paid to your heirs tax-free, ensuring your wealth is preserved for the next generation.
- The policy’s cash value grows over time, providing an additional resource for your financial needs.
This dual-purpose approach makes asset-based LTC a powerful tool for both financial protection and wealth-building.
Asset-Based LTC vs. Traditional Long-Term Care Insurance
|
Feature |
Traditional LTC Insurance |
Asset-Based LTC Insurance |
|
Payout Guarantee |
No (use it or lose it) |
Yes (death benefit or care coverage) |
|
Premiums |
Ongoing, may increase |
Lump sum or flexible payment options |
|
Tax Benefits |
Limited |
Tax-free benefits for care and heirs |
|
Wealth Growth |
None |
Cash value grows over time, earning dividends |
What’s the difference between asset based LTC and a long term care rider?
The key difference between asset-based long-term care (LTC) and a long-term care policy rider lies in funding and purpose.
With an asset-based LTC policy, you fund long-term care first. If care isn’t needed, the remaining funds pass to your beneficiaries as a tax-free death benefit. Its main goal is to cover health costs not included in health insurance.
A long-term care rider, on the other hand, prioritizes funding the death benefit of a permanent life insurance policy. If needed, you can access part of the death benefit for care as a living benefit. Here, the death benefit remains the policy’s primary function, with the rider providing flexibility.
Additionally, payment structures differ. Riders require monthly or annual premiums alongside life insurance payments, while asset-based LTC policies are often funded with a single lump sum, though flexible options may be available depending on the insurer.
Why Choose Asset-Based LTC Insurance?
- Guaranteed payout
Unlike traditional LTC policies, asset-based LTC ensures your premiums never go to waste. If care is needed, the policy covers your costs. If not, the funds pass to your heirs as a tax-free death benefit. - Tax efficiency
Both the care benefits and death benefit are distributed tax-free, reducing the financial burden on your family and preserving more of your wealth. - Cash value growth
Built on permanent life insurance, the policy’s cash value grows at a guaranteed rate. With mutual insurance companies, you may also receive non-guaranteed dividends, further increasing your policy’s value. Because permanent life insurance products, like whole life insurance, are used, your policy earns cash value at a guaranteed rate plus potential dividends. - Financial flexibility
The policy’s cash value can be accessed for other financial needs, such as funding investments or supplementing retirement income. If your circumstances change, you can even cancel the policy and receive the cash value, though taxes may apply.
Who Should Consider Asset-Based Long-Term Care Insurance?
Planning for the future means preparing for unexpected healthcare costs that can significantly impact your savings and financial legacy. Asset-based long-term care insurance is a powerful tool for protecting your wealth and ensuring peace of mind, but is it right for you?
This type of coverage isn’t just for retirees—it’s for anyone who values financial security, legacy preservation, and flexibility in managing future healthcare needs. This policy is especially beneficial for individuals and families who:
Want to protect their wealth
- If you’ve worked hard to build your savings and investments, asset-based LTC ensures that long-term care expenses won’t drain your assets.
- The policy provides a guaranteed payout—either for care or as a death benefit—ensuring that your wealth stays within your family.
Planning their legacy
- Families looking to pass down generational wealth can use asset-based LTC to cover care costs without depleting the inheritance they intend to leave behind.
- The death benefit ensures a tax-free transfer of wealth to heirs, preserving your estate and avoiding unnecessary financial strain on your loved ones.
Have a family history of chronic illness
- If your family has a history of conditions like Alzheimer’s, Parkinson’s, or other chronic illnesses, asset-based LTC insurance provides a safeguard against the high costs of nursing home care, assisted living, or in-home care.
- Knowing you’re covered offers peace of mind for both you and your family.
Want to avoid “use it or lose it” coverage
- Unlike traditional long-term care policies, asset-based LTC guarantees that your premiums won’t go to waste. If you don’t need care, the policy’s benefits will pass to your beneficiaries as a tax-free death benefit.
Are concerned about rising healthcare costs
- With the cost of nursing home care averaging over $8,000 per month (and much higher in some states), asset-based LTC insurance ensures you’re prepared for increasing expenses without jeopardizing your savings.
Value flexibility and growth
- Built on permanent life insurance, asset-based LTC policies accumulate cash value over time, giving you flexibility to use your policy for other financial needs if your circumstances change.
The Paradigm Life Approach: Integrating Asset-Based LTC into Your Wealth Strategy
At Paradigm Life, we specialize in creating holistic financial strategies that protect your wealth and build a legacy. Asset-based LTC aligns perfectly with our Perpetual Wealth Strategy™ by balancing:
Cash Flow: Protect Your Liquid Assets
One of the key tenets of the Perpetual Wealth Strategy™ is maintaining control over your cash flow. Unexpected healthcare expenses, such as nursing home care or in-home assistance, can create a significant financial drain. Asset-based LTC ensures that your liquid assets remain untouched by:
- Covering long-term care expenses through your policy’s benefits.
- Preventing the need to sell investments or withdraw from retirement accounts.
- Offering a tax-free payout for qualified care costs.
This allows your investments and savings to continue growing uninterrupted, preserving your financial momentum.
Protection: Safeguard Your Family’s Future
Financial protection is another cornerstone of the Perpetual Wealth Strategy™. Without proper planning, healthcare costs can erode your estate, leaving less for your heirs. Asset-based LTC provides:
- Guaranteed benefits: Ensures that either care expenses or a death benefit will be paid, eliminating the “use it or lose it” drawback of traditional LTC insurance.
- Tax-free death benefit: Any unused funds pass to your heirs without tax implications, preserving your estate and ensuring your family’s financial security.
- Peace of mind: Protects your loved ones from the financial and emotional burden of covering long-term care costs themselves.
Wealth: Build and Preserve Your Legacy
Unlike traditional LTC insurance, asset-based LTC builds wealth over time by leveraging the cash value growth of permanent life insurance. This aligns with the wealth-building focus of the Perpetual Wealth Strategy™ by:
- Growing cash value at a guaranteed rate, with potential dividends from mutual insurance companies.
- Providing liquidity through tax-free policy loans for other financial needs.
- Creating a lasting legacy through a tax-free death benefit that transfers wealth efficiently to future generations.
By incorporating asset-based LTC, you turn a necessary expense into an opportunity to grow and protect wealth.
Real-Life Example: Gary Pinkerton’s Legacy Plan
Gary Pinkerton, a Wealth Strategist at Paradigm Life, shares his decision to purchase asset-based LTC in his 40s:
“When my mother was diagnosed with Parkinson’s at 51, her care wiped out her savings and prevented her from passing on the wealth she’d planned for her family. That experience taught me the importance of planning early. My wife and I chose asset-based LTC to ensure our wealth will protect us and be passed to our children and the causes we care about.”
How Much Does Asset-Based LTC Cost?
The cost of asset-based LTC depends on factors like your age, health, and desired coverage. For example:
- Nursing home care averages $8,365/month, according to seniorliving.org.
- A policy covering $8,000/month may require a premium of $100,000+, depending on your provider.
Funding options:
- Existing cash value whole life insurance (via a 1035 exchange).
- Retirement accounts (401(k), IRA, Roth IRA).
- Health savings accounts (HSAs).
- Home equity or personal savings.
When Is the Right Time to Get Asset-Based LTC?
Planning for long-term care (LTC) is a critical part of protecting your wealth and ensuring your family’s financial security. Many people wait until their retirement years to consider their options, but when it comes to asset-based long-term care, earlier is better. By planning ahead, you can lock in lower premiums, maximize your policy’s growth potential, and secure coverage while you’re in good health.
The Best Time to Purchase Asset-Based LTC
The ideal time to invest in asset-based long-term care insurance is in your 40s or 50s. Here’s why:
- Lower premiums while you’re younger
- The cost of asset-based LTC depends on your age and health at the time of application. The younger and healthier you are, the lower your premiums will be.
- Waiting until your 60s or 70s can result in significantly higher costs or even disqualification if health issues arise.
- Maximized cash value growth
- Asset-based LTC policies are built on permanent life insurance, which accumulates cash value over time.
- The earlier you purchase your policy, the more time the cash value has to grow, providing a greater financial resource for long-term care expenses or other needs.
- Guaranteed insurability
- Life is unpredictable, and health changes can happen at any age. By purchasing asset-based LTC early, you ensure your insurability and lock in coverage before any potential health issues arise.
Why Early Planning Is Essential
Most people don’t think about long-term care until retirement, but starting earlier has distinct advantages:
- Building a strong financial foundation: Early planning ensures that your healthcare costs are covered without compromising your other financial goals.
- Avoiding uncertainty: The longer you wait, the more risk you take on in terms of rising premiums, reduced coverage options, or declining health.
- Aligning with retirement goals: A well-planned asset-based LTC policy complements your retirement strategy, protecting your savings and allowing you to enjoy retirement without financial worry.
How Early Planning Pays Off
Case study: Planning for the unexpected
Gary and Sue, a couple in their 40s, decided to purchase an asset-based LTC policy after Gary’s mother required 20 years of care due to Parkinson’s disease. By securing coverage early:
- They locked in lower premiums, saving thousands over the life of the policy.
- Their policy’s cash value grew steadily, creating a financial buffer for healthcare costs.
- They ensured that any unused funds would pass to their children as a tax-free death benefit, protecting their legacy.
Their proactive planning not only protected their wealth but also provided peace of mind for their family.
How to Get Started
Approval is based on insurability, which is largely determined by your current health. This is another reason why you should consider an asset-based LTC plan now; no one knows how their health will change down the road, so it makes financial sense to lock in the lowest premium possible.
At Paradigm Life, we make it easy to integrate asset-based LTC into your financial plan:
- Request a free virtual consultation with a Wealth Strategist.
- Review customized illustrations from top mutual insurance companies.
- Complete the application process, including an in-home medical exam if required.
- Fund your policy and start building your financial safety net.
FAQs
How does asset-based LTC differ from traditional LTC insurance?
Traditional LTC is “use it or lose it.” Asset-based LTC guarantees a payout, either as care benefits or a death benefit for your heirs.
Can I fund my policy with existing life insurance?
Yes. Policies can be funded via a 1035 exchange from cash value life insurance or annuities.
Is this policy only for retirees?
No. Purchasing in your 40s or 50s allows for greater cash value growth and lower premiums.
Protect Your Legacy with Asset-Based Long-Term Care
Planning for the future requires more than just protection—it calls for a strategy that secures your wealth, addresses healthcare expenses, and ensures a lasting legacy. Asset-based long-term care (LTC) insurance, a key component of The Perpetual Wealth Strategy™, offers a powerful solution. Combining cash value growth, guaranteed benefits, and tax advantages, asset-based LTC provides financial security while safeguarding your family’s inheritance.
At Paradigm Life, we’re dedicated to helping you align your financial goals with proven strategies. Our expert Wealth Strategists work with you to integrate asset-based LTC into your personalized plan, ensuring your legacy remains protected for generations.
Take the first step toward lasting financial freedom. Contact Paradigm Life today to explore how asset-based LTC can secure your future and provide peace of mind for you and your loved ones.
