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 Nationwide CareMatters II Hybrid LTC policy?
Overview.Nationwide is part of Nationwide Mutual Insurance Company, an A.M. Best A+ rated, 94-year-old company. The Nationwide CareMatters II 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.
Nationwide CareMatters II 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.
Nationwide CareMatters II 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 Nationwide CareMatters II 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.
Nationwide CareMatters II Policy Options. The policy options include: Benefit periods of 2-7 years; Inflation protection of none, 3% simple, 3% compound, 5% compound and U.S. medical care inflation; Elimination period of 90 days, with 0 day retroactive; Residual life insurance benefit (even if you deplete of your LTC benefits) equal to 20% of specified amount and a three Refund of premium options: 1. vesting schedule 85% year 1, 88% year 2, 91% year 3, 94% year 4, 97% year 5, 100% year 6+; 2. One-Time Step Up option that starts at 80% in year 1 and steps up to 100% in year 11; 3. Minimum Refund of Premium with Maximum LTC Benefit.
How Nationwide CareMatters II 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).
Nationwide CareMatters II Outperforms Cash Indemnity Competitors Brighthouse and Minnesota (for Bill) – 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. 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. 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. Nationwide CareMatters II 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.