Two weeks ago, retirement specialist Evan Belaga was featured on the Two-Minute Retirement Solution to discuss a great revolution that’s taking place in the life insurance and long-term care insurance industry. His interview generated over 100 comments and questions from viewers!
Due to popular demand, this week, Evan’s back to talk more in depth about how this revolution has resulted in a new policy option that’s cheaper and more reliable than traditional long-term care.
Steve McDonald: Hi everybody, I’m Steve McDonald. This is your Two-Minute Retirement Solution. Well, he’s back, Evan Belaga, direct from Hawaii to answer the over 100 questions that we’ve gotten from people from his last visit here about long-term care, combining that with life insurance, and how it’s cheaper, more reliable, more money. I mean, for me, it answers all the questions. Evan, thank you so much for taking the time to be with us.
Evan Belaga: Hi, Steve, and thanks for having me on your show.
Steve McDonald: Don’t tell me what the weather’s like over there.
Evan Belaga: [Laughs] Sunny and warm. No East Coast snow, thank you. [Laughs]
Steve McDonald: Okay, great. The first question I want to do is, let’s do a real quick review, just a couple of seconds. What we’re talking about is long-term care combined with a life insurance policy. If you don’t use up long-term care benefits, it acts as a death benefit, is that correct?
Evan Belaga: Exactly. That is 100% correct, and it’s technically a chronic illness rider. It’s not exactly a long-term care rider, but everyone knows it as long-term care. It’s the same exact trigger as long-term care: two out of six activities of daily living; you then qualify to draw up to $10,000 per month for any purpose, not just long-term care expenses.
Steve McDonald: Now, one of the questions that came up – we got a lot of questions about this, what do we got –
Evan Belaga: I know, and I got a bunch more on my end.
Steve McDonald: You had, like, 60, 70, and I got, like, 30 on my email. One of the questions that came up is, if you don’t use it, though, you get the whole value, but the benefit that you get for the chronic illness or long-term care is the total value of the life insurance policy. Is that correct?
Evan Belaga: That is correct, at the rate of up to $10,000 a month. Technically, it’s $9,900 per month. I’m just calling it $10,000 a month.
Steve McDonald: Okay. Now, what about illness, health and age? One of the questions I saw was, “As we age, does the cost of this go up, or how does the premium adjust?”
Evan Belaga: When you purchase the policy, you pick the number of years or an age you want the policy to run, and the premiums will be guaranteed never to increase. So if you come to me and say, “I want coverage for $100,000 – $500,000 worth of benefit, and I want to be able to draw that out for long-term care, I want to have a death benefit,” I said, “First thing is, how long do you want the coverage to run?” A lot of people go, “I don’t know, 80? 85?” Some people say 90, some people say 95 or 100. I say, “Fine, then we can design a policy to go to exactly the age that you want, not waste an extra penny. The premium’s very flexible, but the premium that you select will never change. If you decide along the way that you’re going to live longer or not live as long, you can adjust the premium. It’s very adaptable. So you can adjust as you go.
Steve McDonald: Oh, that’s interesting. Now, one of the other questions that came up: How much of an issue is health in this? You have to have ______. [Inaudible due to crosstalk]
Evan Belaga: Health is a great question. I have had clients who will not qualify for long-term care insurance, but they will qualify for this policy.
Steve McDonald: Okay, whoa. That sounds like a good one. That’s something I never even considered. Tell me about that.
Evan Belaga: Had a client who’s got medical issues, and the long-term care insurance company’s going, “No way, we’re not touching him.” I applied for life insurance with the extended care rider and he qualified. We put $1,500,000 benefit on him. He’s ecstatic.
Steve McDonald: Okay, let’s talk costs now. You quoted a number for age 55 if you do that. Most people haven’t done this. What happens to the cost – the premiums at age 60, 65, let’s say, if people have waited too long? Is that too long, I guess, is the first question?
Evan Belaga: Well, let me think. I put some of those numbers in the grid. Let me see where that grid is that I put together, because it’s respectively lower in almost every situation.
Steve McDonald: Lower than what?
Evan Belaga: Having the long-term – buying life insurance to 65 or buying long-term care insurance to 65, the life insurance’s going to be less expensive. There’s no question. Long-term care insurance is –
Steve McDonald: It’s prohibitive.
Evan Belaga: It’s prohibitively expensive. The premiums are not locked down; they will continue to rise, and it’s a very restrictive benefit that can only be used for very limited purposes.
Steve McDonald: But now this life insurance and the chronic illness rider that you’re talking about takes care of all that, is that correct?
Evan Belaga: That’s it, right.
Steve McDonald: How – that doesn’t make – you know, you have to explain this to me, Evan. If I were running the insurance industry, why would I offer these plans when I could hook people on the long-term care in the higher price?
Evan Belaga: Long-term care insurance, the jury’s still out. The policy is still finding its legs. The claims, as you see, are going through the roof. There’s a lot of consolidation amongst the carriers. The rates are going up. It has to morph again. Long-term care insurance used to be a not-very-likely event. It was a low probability event, and it’s morphing into a higher probability event. So it’s becoming so expensive that two-thirds of the policies that are being sold only pay for four years or less.
Steve McDonald: Right, well, that’s –
Evan Belaga: And the clients are effectively ensuring the early years and self insuring the later years, which –
Steve McDonald: Right, where you’re probably going to need it.
Evan Belaga: – if you look at folks with long-term dementia and Alzheimer’s, they’re living seven, 10 years.
Steve McDonald: I know. I know, it’s a very tough situation. Here’s another question that came up taking a traditional, whole life policy and converting it to this insurance – this life policy that you talk about with the chronic care rider.
Evan Belaga: Well, that’s a good question. The life insurance can be rolled over. These policies are so adaptable, they’re actually on a universal life chassis. So you can make irregular contributions. So you could roll over an old whole life policy’s cash value into this. Do a 1035 Exchange, avoid all the taxable gain. You can drive your premium down. In essence, you’re making a down payment like you would on a mortgage. When you buy a home, you put 50% down, your mortgage is going to be lower. So if you have an old whole life policy that’s no longer efficient or an old universal life policy with cash value that’s no longer meeting your needs, you can roll it over into this. You have a life insurance benefit and you have a long-term care benefit. Your premium will reflect the amount of money that you put in.
Steve McDonald: So you’re telling me that the health requirements are less than they are for just a straight life insurance policy, or at least that’s been your experience.
Evan Belaga: The – one more time, say that –
Steve McDonald: The health requirements, whether – considering your current health, it’s –
Evan Belaga: They are less stringent than on a traditional long-term care. When you apply for this product –
Steve McDonald: That’s hard to believe.
Evan Belaga: – they underwrite you in two ways.
Steve McDonald: I know –
Evan Belaga: For life insurance and for long-term care.
Steve McDonald: Okay, but then the second –
Evan Belaga: Long-term care issues are physical impairments. Longevity are life insurance constraints.
Steve McDonald: Right. Interesting. That’s just fascinating that it works out that way. The second point, then, would be that your premiums never increase, and the value that you have in the policy, either the death benefit or the total long-term care benefit, never changes. Is that correct?
Evan Belaga: Right, and if you want to increase your premium contributions, you can use it just like an income for life private banking whole-life policy. You can use it identically, except there’s a lot more liberal withdrawal provisions available than in the traditional whole-life policies that we’re so excited about.
Steve McDonald: One other question came up. Do you have to be married – you quoted a number the last time you were on for a married couple to use this. I think it was $350,000 in coverage. Both could draw from that if both needed long-term care, which is normally not the case, I understand. Normally, the first one is cared for at home; the second one has to fend for themselves. But what about a couple that isn’t married? Because I know a lot of people here in Florida who can’t get married because of the state issues, taxes, Medicare – or not Medicare, but social security. What happens there?
Evan Belaga: There’s no benefit to being married when you purchase these policies. These are individual policies that each person has to qualify on their own. Some long-term care insurance policies will offer a married discount because they realize that once you’re married, if you have somebody in the house to help take care of you, some of the carriers will reflect that in a reduced rate. Here – and then long-term care policies, sometimes they will hook ’em together so you could use your benefit and your spouse’s benefit so the first one who uses it wins and the second one, like you said, may be left without coverage. Here, each person has their own policy, their own respective benefits that they can draw from, and whatever’s not drawn at the time of death will pay a respective lump sum value to the name beneficiary.
Steve McDonald: I can’t imagine that you aren’t selling these things faster than they can be printed. I mean, it sounds like it answers – I’m not joking. It sounds like it –
Evan Belaga: I know.
Steve McDonald: – answers all of the issues that I have had –
Evan Belaga: Just since the last interview, I’ve had over 100 requests, so it’s going off the hook.
Steve McDonald: That’s great. Anything you’d like to add to summarize what we’ve been talking about?
Evan Belaga: Well, it’s important that you look at what these policies can do in light of your overall financial circumstances. You have long-term care; you have life insurance. It’s meeting both those needs. A lot of people have put in policies years ago that need to be reviewed and understood and determined how well they’re going to perform going forward. Strategies are in place, available these days, that can really help you generate the income necessary, take care of your retirement, and certainly take care of these policies in a more efficient way than people have understood in the past.
Steve McDonald: Interesting. I mean, it’s just – it’s fascinating that they’ve come around so quickly in just the last five or six years. It’s fantastic.
Evan Belaga: And you’re going to see the long-term care business change away from the present model. It has to. It’s no longer efficient. People are grossly underinsured. They’re not covered properly along those policies.
Steve McDonald: Interesting. Well, Evan’s email address is on the screen now. (Email Evan at firstname.lastname@example.org.) Send him your questions. He’s out there to help any way he can. He’s one of our Pillar One partners; he’s been there for years. Evan, thank you so much for being with us today.
Evan Belaga: Thank you, Steve, for having me on your show.
Steve McDonald: It’s my pleasure, and for everybody here at the Two-Minute Retirement Solution, get some coverage. Sounds pretty cheap to me, to be honest with you. I’ll see you next week.