Life/LTC Combo Products Are NOT Cheaper Than Stand-alone LTCi Policies

[scagnt83]

Well, in the Q & A it says it "should not be" used (and it shouldn't - it's expensive if activated too far out). Nowhere does it say it "can't be used." The rider itself makes no mention of permanent, or expectation of permanent, impairment.

I've spoken with the design team and been assured that it need not be permanent. Yes, I have an email in file stating this.

The very first word after the question was YES. In legal contracts, after a definitive answer has been given, shouldn't is the same as no.

Besides, this is the law we are talking about. By law, a 101g rider must have a permanent impairment to trigger it.

Was that an internal at MoO? Or your imo? Either way they are incorrect if MoO is still 101g.

 

[Mr_Ed]

ditto SCAgent.

Thank you for saving me an hour!



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ONE IMPORTANT ISSUE THAT IS NOT UNDERSTOOD BY MOST AGENTS:


the last time I looked at one of these policies, the amount of the long-term care benefit is LESS than the actual death benefit.

when calculating the long-term care benefit they use the "present value" of the $500,000 death benefit.

For example, if she gets alzheimers and has a life expectancy of 8 years, the long-term care benefit would be calculated by taking the present value of the death benefit.

A $500,000 death benefit payable 8 years from now would have a present value of about $400,000 (or even less).

Am I wrong?

 

[TxJohnny]

… Was that an internal at MoO? Or your imo? Either way they are incorrect if MoO is still 101g.

The conversation, and subsequent email, was direct to horse's mouth.

But you may be correct and he may be wrong. If so, it doesn't alter the "attractiveness" formula much, if at all.

I don't see GUL as a direct competitor of LTC insurance. I see it as an alternative for some consumers, who appreciate the overarching protection. The pot of money that gets bought to protect against one thing or the other.

I don't sell much LTC, but I would guess the one of the top objections is something along the lines of "that's a lot of money for something I may not use."

The GUL they'll use. It's an alternative, not for everyone.

 

[scagnt83]

The conversation, and subsequent email, was direct to horse's mouth.

But you may be correct and he may be wrong. If so, it doesn't alter the "attractiveness" formula much, if at all.

He is 100% wrong. Read the contract. And even if you have it in an email, the lawyers are going to ask you why you didnt read the illustration or the contract for the product that you recommended your client put $200k of her retirement savings into.

And most clients would disagree that the Rider not covering around 50% of LTC claims does not change the attractiveness.... most that I have showed it to feel that is a HUGE deal... spend twice the premium for only 50% of the coverage.

 

[Mr_Ed]

A recent MOO scenario:

F - 65 NT

Health: DM w/diagnosis more than 20 years (age 25); this is a knockout for LTC w/MOO but, with excellent control (< 7.0 A1C) gets her Standard for a life policy.

A GUL for 500,000 face amount: 11,450 Ann; this premium can be increased and tailored into a set number of years (i.e., 63,690 x 3 years) providing a truly guaranteed contract. 190k over the next 3 years will become 500,000 at some indeterminate future time.

If this woman would qualify for a LTC policy with MOO, and at a non-substandard rate, it would cost her 6735 per year (5000 per mo. x 5 years, 90 day elim waived for HH, 100% HH, 3% compound for 20 years), until she dies or goes on claim.

Which is a better way for her to spend her money, or allocate her assets? Can you at least argue each position (assuming, in this case, that she would qualify for a LTC policy)?


Note: correction to a reference in Mr_ED's post: I'm not referring to a LTC rider, but a chronic illness rider. Like an accelerated DB rider, but for LTC.

TX,

You do realize that even though the death benefit is $500,000 the chronic illness rider will never pay $500,000 in benefits.

You realize that, right?

 

[aclaro]

TX,

You do realize that even though the death benefit is $500,000 the chronic illness rider will never pay $500,000 in benefits.

You realize that, right?

Thank you. Read the language. It says permanent. Then if you really want to know what you're selling, learn the costs associated with it. It gets expensive quick. It's not comparable to LTC. It's an alternative at best.

 

[Mr_Ed]

Thank you. Read the language. It says permanent. Then if you really want to know what you're selling, learn the costs associated with it. It gets expensive quick. It's not comparable to LTC. It's an alternative at best.

Like I said, I've never seen one of these that is not at least 2x to 3x the premium.

The example TX gave is NOT an apples to apples comparison.
With this policy, at best, the woman could get $420,000 of LTC benefits and NO remaining death benefit.

Yet, the LTC policy he used in this example would have over $540,000 of LTC benefits.

I asked for an accurate comparison and he shows an LTCi policy that has 25% more LTC benefits than the GUL with chronic illness rider. $500,000 of GUL death benefit does NOT generate $500,000 of LTC benefits.

In fact, if she got alzheimers with an 8 year life expectancy, the GUL policy would only generate about $350,000 of LTC benefits.

OUCH!

You sell them on $500,000 of benefits, then they get alzheimer's and the policy calculates out to about $350,000 of LTC benefits.

Wake UP! these riders SUCK compared to a real LTCi policy.

These policies cost 2x to 3x as much as a traditional LTCi policy AND they pay LESS benefits (especially in the worst case scenario like Alzheimer's).

 

[LGilmore]

Often in this business an idea gets thrown out there that seems to good to be true, something for nothing that nobody else does..... yea, this appears to be one of those times.

 

[Mr_Ed]

I'm still waiting for someone to give me an example of a Life/LTC combo policy that has the same benefits in a traditional LTCi policy yet costs less than twice what the LTCi policy costs.

For example, if the LTCi policy has $250,000 of LTC benefits and costs $3,000 per year, can someone show me a Life/LTC combo policy that costs less than twice (e.g. less than $6,000 per year)?

 

[rousemark]

I'm still waiting for someone to give me an example of a Life/LTC combo policy that has the same benefits in a traditional LTCi policy yet costs less than twice what the LTCi policy costs.

For example, if the LTCi policy has $250,000 of LTC benefits and costs $3,000 per year, can someone show me a Life/LTC combo policy that costs less than twice (e.g. less than $6,000 per year)?

You can't really make an apples to apples comparison simply because you also have to charge for the mortality rate with the hybrid product. If a person has no need for the life insurance, it makes no sense to write the hybrid. If they heave no need for the LTCi, it makes no sense to write the hybrid unless it is a plan that has no charge for the LTCi until needed. It only makes sense IF a person has a need for both and then only if the need for the life insurance coverage goes away if the LTCi is exercised assuming the product reduces the death benefit upon using the LTCi. Using the hybrid will be cheaper than wrting two separate polices because (assuming the client goes into a nursing home prior to death) it is "this OR that" coverage and the separate polices are "this AND that". There is still no such thing as "FREE coverage.