Hybrid Life and Long Term Care Insurance With 10-Pay Premiums – Long Term Care University
Long Term Care University – Question of the Month – 11/15/23
By Aaron Skloff, AIF, CFA, MBA
Q: We read the Long Term Care University article ‘Traditional Versus Hybrid Life and Long Term Care Insurance’ and prefer the Hybrid Life and Long Term Care Insurance (LTC) policy. Can we pay for Hybrid Life and LTC policies over 10 years? Will the premium be guaranteed each year?
The Problem – Guaranteed Premiums for an Insurance Policy Paid Over Time
Can you imagine if your major medical health insurance, car insurance or homeowners insurance premiums were guaranteed from year to year? Not only are those premiums not guaranteed, but the insurance companies can increase deductibles, reduce your coverage, or even drop your coverage. In the case of major medical health insurance, the insurance company can simply remove your doctors and other quality doctors and specialists from their “preferred provider network” or “in plan providers”. This leaves you with a list of inferior doctors to choose from or forces you to pay additional out of pocket costs by going out of your network (if your plan even allows out of network providers). Many believe these same problems exist in Hybrid Life and LTC policies.
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The Solution – Hybrid Life and Long Term Care Insurance Premiums Paid Over 10 Years With Guaranteed Premiums Each Year
Many believe Hybrid Life and LTC Insurance companies can simply eliminate which care providers you choose, change your deductible, reduce or drop your coverage, or increase your premiums. Fortunately, Hybrid Life and LTC Insurance policies are based on a pool of money that allows you to choose your care providers without a list determined by the insurance company. The policies have guaranteed deductibles and guaranteed coverage amounts. You cannot be dropped if you pay your premium – even if you file multiple claims. The policies have guaranteed premiums – even if you pay your policy over time, such as 10 years.
Numbers Speak Louder than Words. Let’s look at a husband and wife, Bill and Sue, who are each 55 years old and reside in Maryland. They each pay a $10,000 premium per year for 10 years ($20,000 combined with Nationwide CareMatters Together and OneAmerica State Life Asset Care) and are expected to need LTC in 25 years at the age of 80. Insurance companies classify a premium paid-up (no further payments required) in 10 years as a “10-Pay”. Bill and Sue are comparing Hybrid policies that offer the largest LTC benefits and inflation protection (unless noted otherwise) and prefer cash indemnity. See reimbursement policies in blue and cash indemnity in green in the chart below.
How the Insurance Polices Compare to One Another. The following benefits at age 80 are in the order of: Jim’s monthly benefit, Sue’s month benefit, Jim’s total benefits and Sue’s total benefits. Lincoln MoneyGuard Fixed Advantage provides $11,281, $9,689, $920,725 and $752,073 – and has a 0 day elimination period. Nationwide Care Matters II provides $12,034, $10,093, $1,175,820 (highest total benefits without unlimited benefits for Bill) and $928,042 (highest total benefits without unlimited benefits for Sue) – and has a 90 day with 0 day retroactive elimination period. Nationwide CareMatters Together provides $12,721, $12,721 (highest monthly benefit for Sue) and $1,357,437 (shared) – and has a 90 day with zero day retroactive elimination period. Securian Minnesota Life SecureCare III provides $13,192 (highest monthly benefit for Bill), $11,330, $1,002,559 and $861,078. OneAmerica State Life Asset Care without inflation protection provides $7,604, $7,604 – and has unlimited, lifetime total LTC benefits. OneAmerica State Life Asset Care with 3% compound inflation protection provides $6,690, $6,690 – and has unlimited, lifetime total LTC benefits.
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Conclusions. Premium payments options vary by insurance companies. While a single pay Hybrid Life and LTC Insurance policy may provide the most generous benefits, the same policy may provide less generous benefits if the premiums are paid over time – such as 10 years with guaranteed premiums each year. 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.
