Both traditional and asset-based long term care policies offer similar long term care benefits. Where they differ is in the underlying policy structure, with asset-based plans built around a life insurance model and traditional plans built as a "stand-alone" pure long term care benefit.

The Impact on Pricing

A traditional long term care plan must only account for the possibility that you may claim for long term care. This results in a lower price structure with a lot of leverage since not everyone will claim.

On the other hand, asset-based plans must account for both a death benefit and the possibility of the same death benefit being accelerated for long term care. Either way, the death benefit will be paid out. This results in a higher price structure with lower leverage.

Which is Better for You?    

For the same amount of LTC benefits under either alternative, the choice will come down to your financial objectives.

A traditional LTC plan will offer the lowest annual cost. Owing to its recurring premiums, clients typically pay for it out of investment returns or interest on capital.

Asset-based plans are generally funded in a single payment by repositioning an existing low-yield asset, resulting in net-zero cost. They provide the following benefits:

  • Guaranteed Premiums - Rates will never increase
  • Death Benefit - Payable tax-free to your beneficiary
  • Surrender Provision - Cancel your policy for a return of premium.