November is Long-Term Care Awareness month, and when thinking about long-term care insurance, where does it fall on your “must-have” list?

It’s estimated that 7 million to 9 million U.S. residents had private long-term care insurance in 2010.

It sounds like a lot, but not when you consider that 12 million Americans are expected to need long-term care in 2020.

Or when you consider that there is a close to 70 percent probability that someone over 65 will become either cognitively impaired or unable to complete at least two activities of daily living, necessitating the services of a caregiver. That care doesn’t come cheap.

The Genworth 2012 Cost of Care Survey puts the 2012 median annual rate for a private nursing home room at $81,030.

But despite the cost of long-term care being a top financial concern for most consumers (according to the LIMRA 2012 Insurance Barometer Study), less than 2 percent of consumers have LTCI policies currently in force.

So what are the alternatives?

A lot of people who are “on the fence” with “traditional” LTC coverage, are taking a closer look.

Traditional common obstacles:

– The “Use it or Lose It” structure.

A product people hope to never use..

– Some people do not qualify.

– The under age 40 group has other priorities.

– People with assets but lack disposable income.

– The carrier rate increases.

Good news! There are now alternatives that can help address some of these issues and that’s where LTC linked solutions come into play.

The Annuity/LTC Linked Solution

People who do not health qualify now have options through annuity products with LTC riders. These products can pay a tax-free benefit for qualifying LTC conditions (per provisions in the Pension Protection Act of 2006, which went into effect on January 1, 2010.

These products vary greatly, but generally, the contract value or the guaranteed income is doubled (sometimes tripled) when the annuitant qualifies for the LTC claim.

And there are companies offering annuity/LTC linked products that do not require underwriting.

Instead, there is an exclusion period in which a person will not be eligible to file a claim. Depending on how rich the LTC benefits are, these exclusion periods tend to run between 2 and 7 years.

The annuity/LTC linked solution may also have some appeal if there is a lack of liquid assets for annual premiums.

The annuity will provide either income for retirement or LTC benefits.

For example, some contract will allow taking a guaranteed income, then if qualifying LTC needs arise, the income is doubled. Note: provisions vary greatly among companies.

The Life Insurance/LTC Linked Solution

People with LTC concerns who have excess assets they wish to use to creat a tax-efficient legacy and the younger under 40 group fall into this category.

This solution also appeals to stand-alone LTC policies needing flexibility in funding premiums.

Here’s how it works: the LTC rider is added to a life insurance policy a person intends to purchase. The cost of the rider is generally quite inexpensive, especially for younger individuals to get some initial LTC planning started.

Should a person not qualify for additional long-term care coverage in the future, they at least have the benefits from the life insurance policy in place.

The death benefit from the life/LTC linked product creates a pool of money that can be used, while alive, to help pay for qualifying LTC expenses.

If LTC is never needed or only partially used, any remaining death benefit is paid to the beneficiary.

Exclusion periods generally do not exist with the life products, so the insured could file a claim on these contracts immediately after issue should an unexpected LTC need arise.

However, most products do have an eliminiation period the beginning of the claim. The benefit is normally paid monthly and is a percentage of the LTC rider specified amount, such as 2% of the death benefit per month.

Long-term care riders are generally available on permanent life insurance contracts and generally offer the following:

– A base life insurance policy that fits the person.

– Some products offering premium and death benefit guarantees.

– Leveraged premiums into a life insurance death benefit.

– Premium payment options (single or life pay)

– No “use it or lose it” obstacle.

– Indemnity plans (no bills or receipts to submit)