Long Term Care University – Question of the Month – 08/15/17
By Aaron Skloff, AIF, CFA, MBA
Q: We read the Long Term Care University article that compares Traditional to Combination Life and Long Term Care (LTC) Insurance and prefer the Combination policy (or Hybrid). Can you please review the Nationwide YourLife CareMatters Combination Life and LTC policy?
Overview. Nationwide Life and Annuity Insurance Company is part of Nationwide Mutual Insurance Company, an A.M. Best A+ rated, 92-year-old company. The Nationwide YourLife CareMatters policy is a 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 Combination LTC policies the benefits and premiums are guaranteed. The insurance company either pays: 1) you if you need LTC, 2) your heirs if you do not need LTC, 3) you and your heirs if you need a modest amount of LTC or 4) pays you a refund if you cancel the policy.
Nationwide YourLife CareMatters is Unique Because it is a Cash Indemnity Policy. There are three 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. Traditional Indemnity policies pay up to your monthly LTC benefits if you show even $1 worth of LTC expenses, or documentation of informal care. Cash Indemnity policies pay your monthly LTC benefits regardless of your actual LTC expenses, without needing to submit monthly bills or receipts.
Nationwide YourLife CareMatters 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 YourLife CareMatters policy allows you to use formal care providers (home care agencies or facilities) and informal care providers, including family and friends. Since informal care can be much less costly, you can obtain significantly more care with a lower monthly benefit. This is very valuable for home care.
Nationwide YourLife CareMatters Policy Options. The policy options include: Benefit periods of 2-7 years; Inflation protection of none, 3% simple, and 5% compound; Elimination period of 90 days; Cash indemnity based benefit payment method of the full monthly benefit, regardless of actual LTC expenses; Residual life insurance benefit (even if you deplete of your LTC benefits) equal to 20% of the face amount of insurance and a Return of premium vesting schedule 85% year 1, 88% year 2, 92% year 3, 94% year 4, 97% year 5, 100% year 6.
How Nationwide YourLife CareMatters Compares with Other Combination Life and LTC Policies. Let’s look at a husband and wife, Bill and Sue, who are each 55 years old and reside in New Jersey. 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 Combination policies that offer the largest LTC benefits, with six years of LTC and inflation protection included in the premium. They prefer Indemnity policies (highlighted in blue below).
Nationwide YourLife CareMatters Outperforms Competitors – with Cash Indemnity and High Residual Death Benefit. Bill will have $11,788 monthly and $962,142 total LTC benefits, while Sue will have $8,707 and $654,274, respectively. It includes a 20% residual death benefit, if you deplete the LTC benefits. Lincoln MoneyGuard II is a strong alternative due to its 0 day elimination period. Minnesota Life SecureCare is notable for its traditional indemnity based benefit payment method. Pacific PremierCare Advantage is notable for its 0 day home care elimination period, but 90 days for facility care. State Life Asset-Care I is notable due to its unlimited, lifetime total LTC benefits.
Action Steps and Conclusions. Nationwide YourLife CareMatters provides high monthly and total LTC benefits, with the flexibility of formal and informal care providers. 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.