Interest in life combo products spikes

[kpbdy99]

Interest in combo products is spiking in a large part because a ton of life agents would much rather sell them than to deal with real LTC insurance, so that's all they're presenting. The 7702b products are the best hybrids, and for the most part are good products, if more expensive than traditional LTC. The 101g plans - the chronic illness accelerated benefit plans - are inferior. The unfortunate part is that most consumers who wind up buying a hybrid plan aren't being educated about the LTC Partnership, and don't understand how the accelerated benefit plans actually work at claim time. In many cases they're paying more for inferior coverage.

 

[Allen Trent]

Interest in combo products is spiking in a large part because a ton of life agents would much rather sell them than to deal with real LTC insurance, so that's all they're presenting. The 7702b products are the best hybrids, and for the most part are good products, if more expensive than traditional LTC. The 101g plans - the chronic illness accelerated benefit plans - are inferior. The unfortunate part is that most consumers who wind up buying a hybrid plan aren't being educated about the LTC Partnership, and don't understand how the accelerated benefit plans actually work at claim time. In many cases they're paying more for inferior coverage.

agree on most everything you said. only item i wonder about is the blanket statement that 7702b are for sure better than 101g.

dont 7702b plans require you to 1st accelerate your life insurance death benefit before gaining access to the extension of LTC benefits? for most nursing home stays or needs for care, most are short term. wouldnt a 4% 101g plan have more benefit per month than most 7702b for those shorter needs. wouldnt 7702b only play out better for the longer stays of more than 2 years or so when a person would ever get into the extension of benefits of the 7702g?

I am more of a novice on this topic, but the way I understood the Extension of benefits plans, they are only for sure superior if the person has longer than average claim need.

 

[ltcadviser]

I am more of a novice on this topic, but the way I understood the Extension of benefits plans, they are only for sure superior if the person has longer than average claim need.

Well, remember we are doing long term care planning here. Not short term care planning or average stay in a nursing home care planning.

 

[Allen Trent]

Well, remember we are doing long term care planning here. Not short term care planning or average stay in a nursing home care planning.

True. Fair enough & great point. My only thought is many dont offer as much monthly benefit that the 4% ADB CIA does in some cases.

I still wonder if stand alone LTC & separate no lapse UL/IUL life insurance policy can work in some of those situations for similar premiums

 

[scagnt83]

True. Fair enough & great point. My only thought is many dont offer as much monthly benefit that the 4% ADB CIA does in some cases.

I still wonder if stand alone LTC & separate no lapse UL/IUL life insurance policy can work in some of those situations for similar premiums

Similar premiums today, yes. Similar premiums 10-20 years from now, no.

I think we are at a point in history that the premium difference is about the same, possibly even skewed higher for the traditional route.

Its hard to compare the two options though, because of the guaranteed utilization of the hybrid solution. Most people dont mind paying extra if they are guaranteed to utilize the benefits at some point, especially if it provides a cash value or return of premium. Its a mindset of dollars being used vs. dollars being spent.

 

[Allen Trent]

Similar premiums today, yes. Similar premiums 10-20 years from now, no.

I think we are at a point in history that the premium difference is about the same, possibly even skewed higher for the traditional route.

Its hard to compare the two options though, because of the guaranteed utilization of the hybrid solution. Most people dont mind paying extra if they are guaranteed to utilize the benefits at some point, especially if it provides a cash value or return of premium. Its a mindset of dollars being used vs. dollars being spent.

Yup, that makes sense. I struggle with the extension of benefit hybrid compared to Acceleration of death benefit only. Saw a client recently considering the 2 options. The face on the ADB CIA was $250k with 4% monthly, so it could kick out $10k for 25 months. the extension of benefit product was $4167 per month for 6 years on like a $100k face policy with added $200k of LTC dollars after 100k exhausted.

Considering the extension of benefit required the death benefit to be accelerated 1st before getting access to the bucket of LTC dollars, after 25 months, the extension of benefit policy would have only paid out $100k & another 3 years to get to a total of $250k .

It just didnt seem to add much in total potential claim for the same dollars of premium for a total potential of $300k of claim dollars compare to $250k. Possibly, the rep did something wrong in their illustrations & the extension of benefit product should have provided more per month.

 

[ltcadviser]

Yup, that makes sense. I struggle with the extension of benefit hybrid compared to Acceleration of death benefit only. Saw a client recently considering the 2 options. The face on the ADB CIA was $250k with 4% monthly, so it could kick out $10k for 25 months. the extension of benefit product was $4167 per month for 6 years on like a $100k face policy with added $200k of LTC dollars after 100k exhausted.

Considering the extension of benefit required the death benefit to be accelerated 1st before getting access to the bucket of LTC dollars, after 25 months, the extension of benefit policy would have only paid out $100k & another 3 years to get to a total of $250k .

It just didnt seem to add much in total potential claim for the same dollars of premium for a total potential of $300k of claim dollars compare to $250k. Possibly, the rep did something wrong in their illustrations & the extension of benefit product should have provided more per month.

Companies are charging 25-33% in top of the GUL premium for the 4% ADB rider. If I am paying $10000 a year in premium for x amount of death benefit that my estate owns, do I really want or need to pay 30% more premium for simply the right to accelerate the death benefit before death. The net amount at risk is still the same with or without the ADB rider and it is a decreasing net amount at risk the longer I live. My estate will get the death benefit when I die. I would definitely rather buy a living benefit policy with extension of benefits rider AND 5% compound inflation protection on the pool. The compound inflation factors are the key to the hybrids, especially when you get 5% compound. Now I own an increasing benefit policy to keep up with rising health care costs.

 

[Tahoe Ray]

If I am paying $10000 a year in premium for x amount of death benefit that my estate owns, do I really want or need to pay 30% more premium for simply the right to accelerate the death benefit before death. The net amount at risk is still the same with or without the ADB rider and it is a decreasing net amount at risk the longer I live.

Do communicate that in those terms to a client?

I agree 100% and have made that point to both advisors and clients and I normally get blank stares/silence.

It's like they don't understand that LTC is about asset protection and a GUL, accelerated or not, is essentially a wash at the start that only gets worse.

 

[ltcadviser]

Do communicate that in those terms to a client?

I agree 100% and have made that point to both advisors and clients and I normally get blank stares/silence.

It's like they don't understand that LTC is about asset protection and a GUL, accelerated or not, is essentially a wash at the start that only gets worse.

Yes, I told a guy yesterday to not buy the LTC Rider with Nationwide for a $1,000,000 15 Pay GUL. He was shocked when he saw how much the GUL premium got reduced once I removed the LTC Rider. He could buy so much more LTC benefits in a separate policy with the freed up premium in addition to the million dollar policy he wanted.

 

[scagnt83]

Imo, it is not an apples to apples comparison. Also, paying a lot (or anything) for a Rider on a life policy is quickly becoming an antiquated thing.

A better comparison would be a Chronic Rider that does not require permanent impairment, and does not add extra cost, or significant extra cost. Ameritas/AIG/NA/etc.

But even doing an apples to apples comparison with Riders is close to impossible now. Some act exactly the same, but most have their own unique pros/cons. Especially when you are comparing a WL rider vs. GUL rider vs. IUL rider.

You can make product to product comparisons (exact carrier/product vs carrier/product). But blanket statements about suitability of hybrid vs. Rider will almost never be an accurate statement.

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A lot depends on the expected LTC need and likelihood of utilization, and the clients objectives.

Jack approaches this as "Long Term Care Planning". But many clients and advisors approach it as "asset protection".

The goals of the two approaches are different. Just like the goals of a hybridLTC vs. Life/w Rider are different. If your sole focus is LTC benefits, you will always look at the Rider solution in a negative way. But if your focus is on comprehensive asset protection that is situation specific, then you start to see uses for the Riders in many situations.


LTC Benefit:
The hybrid policy will always pay more LTC benefits per dollar of premium.

Death Benefit:
The Rider policy will pay 3x-5x more in Death Benefit if LTC Rider is not used.
The hybrid policy is essentially a return of premium death benefit, if LTC benefits are not used.

Cash Value:
Hybrid policy is essentially a return of premium CV.
A WL/Rider can provide 2%-4% growth of premiums paid. Same with IUL/Rider.


So if a client feels they are likely to use LTC benefits, a hybrid policy is most often best.
If a client is uncertain about the likelihood of using LTC benefits, then a Rider can often be a good fit as it provides better alternative options if LTC benefits are not used.