Long Term Care University – Question of the Month – 09/15/17
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 Pacific PremierCare Advantage Combination Life and LTC policy?
Overview. Pacific Life Insurance Company is an A.M. Best A+ rated, 149-year-old company. The Pacific PremierCare Advantage 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.
Pacific PremierCare Advantage is Unique Because It Does Not Have an Elimination Period for Home Care. Like a deductible on an automobile or homeowners insurance policy, an elimination period on a LTC insurance policy shifts the initial cost of a claim to you and away from the insurance company. An elimination period is the number of days you are responsible for paying for your LTC costs out of your own pocket. With a zero day elimination period, you gain three advantages: 1) Zero or low out-of-pocket costs when your care begins at home, 2) Higher probability the insurance company will pay all of your LTC costs and 3) Zero or low probability you will need to liquidate assets (and have to pay the commissions, taxes and penalties associated with those liquidations) to pay for your care during your elimination period.
Many LTC polices have a 90 day elimination period, which could result in a $36,000 out-of-pocket cost per person ($400 per day times 90 days). Pacific does not have an elimination period for home care, which could save a couple $72,000 in out-of-pocket costs.
Pacific PremierCare Advantage Policy Options. The policy options include: Benefit periods of 2-8 years; Inflation protection of none, 3% simple, 5% simple and 5% compound; Elimination period of zero days and 90 days; Reimbursement based benefit payment method; Residual life insurance benefit (even if you deplete of your LTC benefits) equal to the lesser of 5% of the face amount of insurance or $5,000 and a Return of premium vesting schedule of 100%.
How Pacific PremierCare Advantage 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, inflation protection included in the premium and prefer a zero day home care elimination period (in blue below).
Pacific PremierCare Advantage Outperforms Competitors – with Zero Day Home Care Elimination Period and High Monthly and Total LTC Benefits. Bill will have $13,300 monthly and $1,085,612 total LTC benefits, while Sue will have $10,723 and $815,007, respectively. Lincoln MoneyGuard II is a strong alternative due to its zero day elimination period. Minnesota Life SecureCare is a strong alternative due to its traditional indemnity based benefit payment method. Nationwide YourLife CareMatters is notable for its cash indemnity based benefit payment method. State Life Asset-Care I is a strong alternative due to its unlimited, lifetime total LTC benefits.
Action Steps and Conclusions. Pacific PremierCare Advantage provides high monthly and total LTC benefits, with a zero day home care elimination period. 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.