Does anyone ever use an annuity to fund LTC?

Discussion in 'Annuities Forum' started by NHB_MMA, Nov 11, 2006.

  1. NHB_MMA
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    On reading on the various uses of annuities sometime back I wondered if they're ever used to fund LTC premiums? Anyone ever done this?
     
  2. James
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    Its done but I don't think its the most productive way of funding future needs of LTC. Yet I don't think you should sell an Annuity to people nearing retirement that does not have a LTC option to it unless their LTC planning is already properly funded.
     
  3. NHB_MMA
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    Annuities with LTC benefits usually only have limited or partial benefits, right? That is the impression I have from things I've heard, but I am not an expert on them.

    I think the potential use I was thinking of is someone that wants a very comprehensive coverage plan, but does not want to pay the sizeable premium out of their current monthly income. For example, someone wants a high daily amount, lifetime benefits, and some form of inflation protection, but doesn't want to take money out of their nest egg on a regular basis to pay for them at this time. It could be set up like a lump-sum payment through an annuity.
     
  4. James
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    What you're describing is someone that should be interested in protection of Assets. In that case I think a W/L policy would be better suited. Lifetime coverage is a bit much, most are moving away from it as it tends to be more expensive then what is called for. Even John Hancock and other large Carriers of LTC is moving away from lifetime coverage as I believe they are finding it a bit much.
     
  5. NHB_MMA
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    Personally, I think life insurance companies are making a huge mistake by assuming people are going to start living longer. I think we've reached the peak of all that. I've heard some say that with the sedentary lifestyle and poor diet choices, my generation will actually have a lower lifespan. I think it's possible that life insurance companies will adjust their rates to anticipate people living up to 120, as opposed to 100 on current illustrations, still have many people dying around age 70 or 80, and we might find that in 50 years many of the life companies have folded. Just my suspicion.

    As for the WL in asset protection, how would that be better than a good LTC plan? Are you saying a person should have a WL policy in place that they can surrender and use to pay for LTC expenses? If so, they would need at least a 500K face amount, if not 1M, in my opinion to make sure they have a good cash surrender value in their senior years. I'm not following what you're saying.
     
  6. James
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    No in the W/L or UL with the ryder they would dip into the DB not the CV of the policy. Basically the same thing as a CI Ryder except it gets triggered by the ADL's. Most common is choosing 1% for five years or 3% for three years of DB as the benefit amount. So for 1% if you want $5,000 a month in benefits you would need a DB of 500,000 W/L contract. While more then a LTC contract for that amount, which is around $3,000 annually in a scenario of don't use it-loose it, which isn't a good selling point. In the W/L contract if you don't use it you pass it along to your beneficiary.
     
  7. NHB_MMA
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    Interesting idea. So you basically pay for it with something similar to a Critical Illness rider? I'm not knocking the idea at all, but some thoughts come to mind. First, $5000 per month might be a little low for many nursing facilities. Second, I might be able to get a 500K WL policy for 3K per year (I'm 31 yrs. old), although it's probably a little more with NYL. However, if you're marketing this to someone in their 50's or 60's you're not going to touch that rate...and the reality is that is who usually is thinking about LTC. That then brings us back to the idea of will it really be affordable to those that are seeking the coverage? Young people are not likely to really put much thought into this if the extra rider means extra premium. Last, on a more positive note, I do really like the idea of selling the fact that it goes to your survivors if it's leftover, which probably figures out better than a return of premium rider.

    Can you crunch some numbers or give an example?
     
  8. James
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    Okay, lets take John Hancock depending upon what State you live in. Protection UL G-06. At 150 grand with 4% LTC Ryder the yearly premium being 4529.00, no lapse at age 60 to purchase. That would be at 4% a monthly benefit of $6,000 which would last for about 2 years and 2 months, or you can choose the 200% Benefit Lenght period that will extend the bene period double or for over 4 years and it brings the premium up to $5,559.00.

    Or you can be smart and since we are talking people with Assets you can dump money into it and forgo the premium as a paid up policy. Such as with Genworth LTCi and UL, you go in and dump $126,938 out of savings or qualified money you don't expect too need. One time payment, if you die at age 81 without drawing out any money for LTC or borrow any money you beneficiary would realize a DB of $218,500.00 which could be there favorite charity, alumni or church. I know one circle of guys that are competeing on how much they will leave Broadway Baptist upon their death! One guy died last year and left 75 grand, my wifes grandfather decided to add monies to his account as he doesn't want to be outdone by Fred that died last year! In other words ask around, you be amazed at what people have saved money for, then its just a matter of selling Wholesale Vs Retail!

    Ps "Genworth Total Living Coverage" Allianz has a Lifefund, II or III that is really good also yet not available in TN.
     
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