Long Term Care University – Question of the Month – 07/01/19
By Aaron Skloff, AIF, CFA, MBA
Q: We read the Long Term Care University article that compares Traditional to Hybrid-Combination Life and Long Term Care (LTC) Insurance and prefer the Hybrid-Combination LTC policy. Can you please review the Brighthouse SmartCare Hybrid LTC policy?
Overview. Brighthouse Life Insurance Company, an A.M. Best A rated, 2-year-old company (originating from Travelers and MetLife). The Brighthouse SmartCare policy is a Hybrid-Combination Life and Long Term Care Insurance (also called Hybrid or asset based) policy. With Traditional LTC policies, premiums can be increased and you may not receive any benefits if you do not need LTC. With Hybrid LTC policies the benefits and premiums are guaranteed. The insurance company either: 1) pays you if you need LTC, 2) pays your heirs if you do not need LTC, 3) pays you and your heirs if you need a modest amount of LTC or 4) pays you a refund if you cancel the policy.
Brighthouse SmartCare is Unique Because it is a Cash Indemnity Policy. There are two primary benefit payment methods among LTC policies. Reimbursement policies, the most common type of policies, require you to submit documentation of all expenses for reimbursement up to your monthly LTC benefits. Cash Indemnity policies pay up to your monthly LTC benefits, regardless of your expenses.
Brighthouse SmartCare is Unique Because It is an Indexed Universal Life Insurance Policy Offering the Option to Link Policy Values to Major Market Indices. With most LTC policies you choose a fixed inflation protection growth rate (e.g.: 3% or 5% compound). With Brighthouse SmartCare you can choose a fixed inflation protection or one linked to a financial market indices (indexed). Benefit amounts have the potential to increase with market gains up to an annual maximum growth rate (cap) but will never drop below the policy’s original amounts. You can choose to track one or more of the following indices: S&P 500 Index, Russell 2000 Index, or MSCI EAFE Index.
Brighthouse SmartCare Policy Options. The policy options include: Benefit periods of 4 or 6 yearss; Inflation protection growth rate (e.g.: 3% or 5% compound). With Brighthouse SmartCare you can choose a fixed inflation protection or one linked to a financial market indices (indexed). Benefit amounts have the potential to increase with market gains up to an annual maximum growth rate (cap) but will never drop below the policy’s original amounts. You can choose to track one or more of the following indices: S&P 500 Index, Russell 2000 Index, or MSCI EAFE Index.
Brighthouse SmartCare Policy Options. The policy options include: Benefit periods of 4 or 6 years; Inflation protection of none, 5% compound or indexed; Elimination period of 90 days; Terminal illness benefit at the lesser of $250,000 or 50% of your policy’s face amount; Cash surrender value varies by benefit design and inflation protection option selected.
How Brighthouse SmartCare Compares with Other Hybrid LTC Policies. Let’s look at a husband and wife, Bill and Sue, who are each 55 years old and reside in Oregon. They each pay a $100,000 one-time premium ($200,000 combined with State Life) and are expected to need LTC in 25 years at the age of 80. They are comparing Hybrid policies that offer the largest LTC benefits, with six years of LTC and inflation protection included in the premium (unless noted otherwise). They prefer Cash Indemnity (highlighted in blue in the chart below).
Brighthouse SmartCare Underperforms Most Competitors on a Guaranteed Basis with Lower Monthly and Total LTC Benefits. Bill will have $11,611 monthly and $947,759 total LTC benefits, while Sue will have $9,168 and $748,304, respectively. Lincoln MoneyGuard II is a strong alternative due to its highest monthly benefit and its 0 day elimination period. Minnesota Life Securian SecureCare is notable for its a cash indemnity benefits. Nationwide Care Matters II is a strong cash indemnity alternative for Bill due to its higher monthly and total LTC benefits and its 90 day with 0 day retroactive elimination period, and is notable for its U.S. medical care inflation option. Pacific PremierCare Choice MAX is notable for its 0 day home care elimination period, but still has 90 days for facility care. OneAmerica State Life Asset Care is a strong alternative due to its unlimited, lifetime total LTC benefits.
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Action Steps and Conclusions. Brighthouse SmartCare has the option to link policy values to market indices, with the flexibility of formal and informal care providers (including family and friends).Since premiums vary greatly based on age, health and marital status, request individualized quotes.
Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA) charter holder, Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at www.skloff.com or 908-464-3060.