Traditional Versus Hybrid Life and Long Term Care Insurance With a Single Premium Payment – Which Is Better? – Long Term Care University – 12/15/23
Long Term Care University – Question of the Month – 12/15/23
Research
By Aaron Skloff, AIF, CFA, MBA
Q: We read the Long Term Care University article ‘Traditional Versus Hybrid Life and Long Term Care Insurance’. Can you compare Traditional versus Hybrid Life and Long Term Care (LTC) Insurance premiums paid with a single premium? Which is better?
The Problem – Increasing Premiums with Traditional Long Term Care Insurance Policies
Most Traditional LTC insurance policies have non-guaranteed premiums that can increase in the future. Many Hybrid Life and LTC insurance policies have guaranteed premiums that can never increase in the future.
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The Solution – Guaranteed Single Premium Traditional Long Term Care Insurance Policies
Although most Traditional LTC insurance policyholders have seen their premiums increase at a slower rate than their major medical health insurance and other insurance premiums, they are often unhappy with the increases. A guaranteed single premium Traditional LTC insurance policy, by definition, eliminates the risk of premium increases.
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 combined $200,000 single premium (unless noted otherwise) and are expected to need LTC in 25 years at the age of 80. They are comparing Traditional to Hybrid policies that offer the largest LTC benefits and inflation protection (unless noted otherwise) and prefer cash indemnity. See a cash indemnity Hybrid policy in green, reimbursement Hybrid policies in blue and Traditional reimbursement policies in orange in the chart below.
Nationwide CareMatters Together Shared Hybrid Life and Long Term Care Insurance. CareMatters Together is a cash indemnity policy, with the option for a guaranteed single premium, that provides 8 years of care either Bill or Sue can use. Bill and Sue will each have $15,199 monthly and a combined 8 years of care for a total of $1,621,816 at age 80. The policy will pay a $261,322 death benefit when the last person dies if neither needs care.
OneAmerica State Life Asset Care Shared Hybrid Life and Long Term Care Insurance. Asset Care is a reimbursement policy, with the option for a guaranteed single premium, that provides unlimited, lifetime total LTC benefits either Bill or Sue can use for care. Bill and Sue will each have $10,228 monthly (or $8,476 monthly with 3% compound inflation protection) and unlimited, lifetime benefits at age 80. The policy will pay a $255,706 (or $104,238 with 3% compound inflation protection) death benefit when the last person dies if neither needs care.
National Guardian Life EssentialLTC Traditional Long Term Care Insurance Policy. EssentialLTC is a reimbursement policy, with the option for a $198,784 guaranteed single premium, that provides 4 years of care for Bill and 4 years of care for Sue. Bill and Sue will each have $460 per day (similar to $13,800 monthly) and each have $672,520 total LTC benefits at age 80.
Configured differently, EssentialLTC is a reimbursement policy, with the option for a $190,795 guaranteed single premium, that provides unlimited, lifetime total LTC benefits either Bill or Sue can use for care. Bill and Sue will each have $272 per day (similar to $8,160 monthly) and each have unlimited, lifetime total LTC benefits at age 80.
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Conclusions. Nationwide CareMatters Together offers a strong value due to its guaranteed premium, cash indemnity benefits, relatively generous monthly and total LTC benefits. OneAmerica State Life Asset Care offers a strong value due to its generous monthly and unlimited, lifetime total LTC benefits. Both policies offer a better value than the National Guardian Life EssentialLTC policy. 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.
