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 Minnesota Life SecureCare Hybrid LTC policy?
Overview. Minnesota Life is part of Securian Financial Group, an A.M. Best A+ rated, 139-year-old company. The Minnesota Life Securian SecureCare 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.
Minnesota Life Securian SecureCare 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.
Minnesota Life SecureCare is Unique Because It Pays for Formal and Informal Care from Family and Friends. Most LTC policies prohibit informal care, particularly if the care is provided by a family member. The Minnesota Life SecureCare policy allows you to use formal care providers (home care agencies or facilities) and informal care providers, including family and friends. Since informal care providers can be much less costly, you can obtain significantly more care with a lower monthly benefit. This is very valuable for home care.
Minnesota Life Securian SecureCare Policy Options. The policy options include: Benefit periods of 2-7 years; Inflation protection of none, 3% simple, 3% compound, 5% simple and 5% compound; Elimination period of 90 days; Residual life insurance benefit (even if you deplete of your LTC benefits) equal to the lesser of 10% of the face amount of insurance or $10,000 and a Return of premium vesting schedule 80% year 1, 84% year 2, 88% year 3, 92% year 4, 96% year 5, 100% year 6+.
How Minnesota Life SecureCare 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).
Minnesota Life Outperforms Cash Indemnity Competitors Brighthouse and Nationwide (for Sue) – with Higher Monthly and Total LTC Benefits. Bill will have $13,404 monthly and $1,094,093 total LTC benefits, while Sue will have $11,301 and $877,225, respectively. Brighthouse SmartCare is notable for its option to link policy values to major market indices. 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. Lincoln MoneyGuard II is a strong alternative due to its highest monthly benefit and its 0 day elimination period. 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. Minnesota Life SecureCare provides high monthly and total LTC benefits, 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.