Not All Hybrid Life and Chronic Illness and Long Term Care Insurance Policies Are The Same – Part 2 – Long Term Care University – 12/15/22
Long Term Care University – Question of the Month – 12/15/22
Research
By Aaron Skloff, AIF, CFA, MBA
Q: We read the Long Term Care University article that compares ‘Traditional Versus Hybrid Life and Long Term Care Insurance’ and ‘Not All Hybrid Life And Chronic Illness And Long Term Care Insurance Policies Are The Same’ Part 1, and prefer the Hybrid Long Term Care Insurance (LTC) policy. Can you give us examples of premiums and benefits of these policies?
Overview. Hybrid Life and Chronic Illness and Hybrid Life and LTC Insurance policies provide guaranteed benefits and guaranteed premiums. The insurance company either: 1) pays you if you need care, 2) pays your heirs if you do not need care, or 3) pays you and your heirs if you need a modest amount of care.
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The Problem – Not All Hybrid Life and Chronic Illness, and Hybrid Life and Long Term Care Insurance Policies are the Same
Although most Hybrid Life policies appear the same on the surface, there are many differences.
The Solution – Compare Hybrid Life and Chronic Illness or Hybrid Life and LTC Insurance Policies Side by Side
The best way to identify the strengths and weaknesses of the policies is to see what benefits they provide under various scenarios.
Bill and Sue Example. Let’s look at a husband and wife, Bill and Sue, who are each 55 years old, in good health (“Preferred”) and reside in New Jersey. They are each looking for a Hybrid Life Insurance policy that is guaranteed to pay $500,000 of death benefit or care at a rate of 4% per moth of the death benefit, when they are likely to need care at age 80. They also want to be guaranteed if they do not need care until their 90s or die without needing care at age 100+, the policy will still pay a care or death benefit. We examine four types of policies with two types of riders below.
Mutual of Omaha Life Protection Advantage IUL Hybrid Life with No Upfront Cost Chronic Illness Rider. Bill’s annual premium would be $5,510, while Sue’s would be $4,840. Each policy has a maximum care limit of 80% of the death benefit, or $400,000. The policy has an additional maximum care limit based on an interest rate discount and Mutuals Omaha’s estimate of life expectancy at time of claim. If they need care at 80 and Mutual of Omaha determines their life expectancy is 10 years, their maximum care benefit would be $200,000 [$500,000 death benefit less (maximum 6% interest rate discount X 10 years)]. The death benefit is reduced by $1 for each $1 of care benefit received. The policy does not have a guaranteed care or death benefit beyond age 90. See the chart below.
Mutual of Omaha Life Protection Advantage IUL Hybrid Life with Paid Long Term Care Insurance Rider. Bill’s annual premium would be $6,665, while Sue’s would be $5,880. Each policy has a maximum care limit of 100% of the death benefit, or $500,000. The policy has a fixed monthly care benefit equal to 4% of the death benefit care benefit, or $20,000. If they need care at 80 or in their 90s the maximum care benefit would be $500,000. The death benefit is reduced by $1 for each $1 of care benefit received. The policy does not have a guaranteed care or death benefit beyond age 90. See the chart below.
Nationwide No-Lapse Guarantee UL II Hybrid Life with Paid Long Term Care Insurance Rider. Bill’s annual premium would be $8,730, while Sue’s would be $8,206. Each policy has a maximum care limit of 100% of the death benefit, or $500,000. The policy has a fixed monthly care benefit equal to 4% of the death benefit care benefit, or $20,000. If they need care at 80 or in their 90s the maximum care benefit would be $500,000. The death benefit is reduced by $1 for each $1 of care benefit received. The policy has a guaranteed care or death benefit to age 120. See the chart below.
Securian Eclipse Protector II IUL Hybrid Life with Paid Chronic Illness Insurance Rider. Bill’s annual premium would be $7,840, while Sue’s would be $6,813. Each policy has a maximum care limit of 100% of the death benefit, or $500,000. The policy has a fixed monthly care benefit equal to 4% of the death benefit care benefit, or $20,000. If they need care at 80 or in their 90s the maximum care benefit would be $500,000. The death benefit is reduced by $1 for each $1 of care benefit received. The policy has a guaranteed care or death benefit to age 120. See the chart below.
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Action Steps. Since premiums vary greatly based on type of riders, 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.
