Do you have clients looking for guarantees in long-term care insurance (LTCi)? If so, for many agents, the “knee-jerk” reaction is often to go straight to a hybrid or linked-benefit solution. If that’s you, read on!
This may seem “counterintuitive” to some of you, but return of premium (ROP) riders and a Society of Actuaries study may show traditional, stand-alone LTCi as a great solution for many of your clients!
Let’s look at an example where an agent compares a Prudential guaranteed universal life policy with a chronic illness rider, against a Mutual of Omaha traditional LTCi plan, for a single male who’s age 55 and lives in New York.
The Prudential GUL policy is at a preferred rate, $6K/month, $300K pool, no inflation Premium is $4,485
The Mutual of Omaha LTCi policy is at a select rate, $6K/month, $300K pool, no inflation
- Premium without any ROP $1,366
- Premium with “3x Maximum Monthly Benefit” ROP ($18K return upon death) $1,534
- Premium with full ROP, less claims paid out $3,129 (still 30 percent less than hybrid option!)
Make no mistake, if your client needs (or wants) a substantial death benefit, the hybrid solution may be the best solution. However, keep in mind what we are illustrating here. That is, what is the “best” LTC planning solution for the client who is mainly concerned about either (a) “What if I never use it?” or (b) “Will rates go up?”
Additional advantages to consider in this comparison:
- In pretty much every instance, stand-alone LTCi will provide a better benefit-to-premium-dollar ratio.
- The Society of Actuaries did an LTCi pricing study in November of 2016. The study found that folks who purchase LTCi today have only a 10 percent chance of receiving one rate action in their lifetime. And if one is in that 10 percent, the projected rate increase is only 10 percent.
- In summary, future rate actions are largely “baked in the cake!”
- Many states have a tax credit or deduction for LTCi purchases.
- In New York, it’s a 20 percent dollar-for-dollar credit.
- That takes the full ROP quote down from $3,129 to $2,503 after the credit. That’s a savings below the GUL quote of 44 percent!
- There’s a waiver of premium immediately after elimination period is satisfied. (For the GUL policy, this happens after 25 months.)
- With the Mutual of Omaha LTCi policy, there’s no need for a paramed exam. (A paramed may be needed with life/hybrid policies.)
- Most chronic illness riders in New York require an expectation of permanence to trigger benefits; this isn’t so with LTCi.
So, the next time you have that client who’s concerned about rate stability and a guarantee that, if they don’t have an LTCi claim, they will get all their premiums back, take a closer look at stand-alone LTCi!
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Want a similar comparison for your client? Contact our strategic partners, the LTC Sales Solutions Team at Advisors Insurance Brokers today! You can reach Melissa Frasier, LTC Brokerage Director, at 800-695-8224 ext. 115 or Jennifer Brown, LTC & Linked Benefit Sales Solutions Specialist, at 800-695-8224 ext. 126.
Ritter Insurance Marketing is proud to partner with Advisors Insurance Brokers for LTCi sales support.