Long Term Care University – Question of the Month – 01/15/19
By Aaron Skloff, AIF, CFA, MBA
Q: We read the Long Term Care University article 1035 Tax-Free Exchange and are interested in Hybrid Combination Annuity and Long Term Care (LTC) Insurance policies. Can you review the OneAmerica State Life Annuity Care II Hybrid Combination Annuity and LTC policy?
Overview. State Life Insurance Company Group is part of OneAmerica, an A.M. Best A+ rated, 142-year-old company. The Annuity Care II policy is a Hybrid Combination Annuity and Long Term Care Insurance policy. With Traditional LTC policies, premiums can be increased and you may not receive any benefits if you do not need LTC. With Hybrid Combination 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.
Hybrid Combination Annuity and Long Term Care Underwriting. Traditional LTC companies and Hybrid Combination Life and LTC companies conduct extensive underwriting. This often includes ordering and examining all of your medical records from your physicians, specialists, hospitals and outpatient facilities. It may include a paramedical exam to gather: your blood pressure, height and weight, an EKG, urine sample and blood sample. The more information underwriters have, the more likely they will find a reason to deny your application. While Traditional LTC companies approve the lowest percentage of applicants, Hybrid Combination Life and LTC companies approve a higher percentage. Hybrid Combination Annuity and LTC companies approve the highest percentage – approximately 80% to 95%.
Hybrid Combination Annuity and LTC companies do not require medical exams, do not require paramedical exams, and do not order medical records. They primarily rely on a telephone or face-to-face interview to test your cognitive skills. Thus, approvals are determined in 1-5 days.
OneAmerica State Life Annuity Care II is Unique Because It Offers More Years of Care, More Total LTC Benefits and a Shared Policy. Most Hybrid Annuity and LTC individual policies provide 6 years of care with total LTC benefits equal to 3 times the premium. Annuity Care II can be purchased with 11 years of care and total LTC benefits equal to 5.5 times the premium. A shared policy is available.
OneAmerica State Life Annuity Care II Policy Options. The policy options include: Benefit periods of 5, 8 or 11years for an individual policy; Benefit periods of 5.5, 8.5 and 11.5 years for a shared policy; Nonforfeiture and Inflation protection of none or 5%.
How OneAmerica State Life Annuity Care II Compares with Other Hybrid Combination Annuity and LTC Policies. Let’s look at a husband and wife, Bill and Sue, who are each 65 years old and reside in Georgia. They each pay a $100,000 one-time premium (or $200,000 combined with Global Atlantic or State Life) and are expected to need LTC in 15 years at the age of 80. They are comparing Hybrid Combination Annuity and LTC policies that offer the largest LTC benefits, with at least six years of LTC benefits.
OneAmerica State Life Annuity Care II Outperforms Competitors – with the Highest Monthly & Total LTC Benefits. Bill and Sue will each have $4,415 or $4,234 (or $6,306 shared) monthly and $423,926 or $559,000 (or $870,279 shared) total LTC benefits. Global Atlantic Forethought ForeCare is a strong alternative due to its 0 day elimination period for home care. Lincoln LTC Fixed Annuity is notable for its high monthly LTC benefit on a guaranteed basis. Guaranty Income Life AnnuiCare is notable for its non-guaranteed high daily LTC benefit.
Action Steps and Conclusions. OneAmerica State Life Annuity Care II provides the highest monthly and total LTC benefits for individual polices and shared policies. 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.