LTC Annuity

[Arthur Rudnick]

originally posted by scagnt83

I have found that clients like LTC-Annuities for two reasons:
1. Its not use it or loose it when it comes to premiums.
2. Clients love to make a single
bucket of money work in multiple ways. (They feel they are getting a bigger bang for the buck)

There's very little leveraging in an Annuity/LTC policy.
If someone puts $200,000 in the policy and needed care down the road, the first $200,000 is their own money. The carrier doesn't pay anything.

Isn't it better to pay $2,000, $3,000 or $4,000 a year and have a stand-alone LTC policy pay the bulk of the benefit not the policyholder?

 

[jmarkk1]

originally posted by scagnt83



There's very little leveraging in an Annuity/LTC policy.
If someone puts $200,000 in the policy and needed care down the road, the first $200,000 is their own money. The carrier doesn't pay anything.

Isn't it better to pay $2,000, $3,000 or $4,000 a year and have a stand-alone LTC policy pay the bulk of the benefit not the policyholder?

I don't think so, because it's sort of a gamble.

Why would perfectly healthy person pay $5k a year on policy that they may not ever use? I understand the argument that they might use it and thus they need to favor paying an insurance premium to cover costs.

If they can, I think it makes perfect sense to fund the LTC benefits through an annuity or even hybrid life insurance policy. There are pros and cons with each option, but for the client that's paying $5k per year for LTC, I think they would have at least benefited from looking at the other options available.

 

[Arthur Rudnick]

originally posted by jmarkk1

I don't think so, because it's sort of a gamble.

Why would perfectly healthy person pay $5k a year on policy that they may not ever use? I understand the argument that they might use it and thus they need to favor paying an insurance premium to cover costs.

If they can, I think it makes perfect sense to fund the LTC
benefits through an annuity or even hybrid life insurance policy. There are pros and cons with each option, but for the client that's paying $5k per year for LTC, I think they would have at least benefited from looking at the other options available.

Understand that every insurance policy available is "sort of a gamble". While I'm not a big fan of any hybrid policy, in my mind a life/ltc policy makes more sense than an annuity/ltc contract. Some people are in a financial position where they can self-insure their home, yet most everyone has homeowners insurance.

It goes back to what insurance is and does. For pennies on the dollar, catastrophic financial risks can be put into the hands of an insurance company

There are also Return of Premium options available on all LTC policies. Although expensive, they are way less expensive than putting up $100,000+ upfront for an annuity.

Annuites, life insurance & LTCi address 3 separate financial issues. For those that decide LTC is their prime concern, they'll most likely purchase a stand-alone LTC policy. If LTC is not a concern, why would it even be on the table for discussion?

 

[CALTCAgent]

The LTC Annuities that I've seen give clients coverage that they need,

So does standalone LTC.

and they are not losing anything. If client doesn't need LTC, then annuity value is passed on to beneficiaries.

LTC annuities have a cost, just like standalone LTC. There is a premium involved. There are pros and cons.

The chance of needing LTC is higher than not needing it based on published statistics.

With LTC annuity, you use your own money first. This is the MOST expensive way to pay for LTC.

Nothing against LTC annuities, but lets compare the facts.

LTC policies may or may not pay out. Client has to qualify for these benefits, and we all know that it can be hard to qualify.

The annuity LTC benefits may or may not pay out. You must qualify for LTC annuities. If they are "easier", point to where any company material shows that is the case?

Secondly, if client doesn't go into LTC/Home Care....premiums are wasted. To each his/her own, but you can't say that the LTC Annuity offers a losing proposition for client when referring to premium that is funding policy.

There is a premium that may be "wasted" in the LTC annuity, an "opportunity" cost of, for example, tying up 200K at 1 to 2% for 30 years.

 

[billberry12]

"There are also Return of Premium options available on all LTC policies"

Not on all and disappearing very fast as an option....

 

[Arthur Rudnick]

previously posted by Bill Berry

"There are also Return of Premium options available on all LTC policies"
Not on all and disappearing very fast as an option....

I stand corrected Bill,
You're right;
Return of Premium is going the way of any elimination period shorter than 60 months and any daily benefit more than $50.00.

I also think some carriers are changing their age limits to 25 years or less and also doing away with a benefit period longer than 30 days.

Coinciding of course with rate increase requests of 100% a year.

I think it has something to do with either the lapse rates or global warming, but I'm not certain.

Boy, I yearn for the days when LTCi was in it's infancy.......

 

[scagnt83]

originally posted by scagnt83



There's very little leveraging in an Annuity/LTC policy.
If someone puts $200,000 in the policy and needed care down the road, the first $200,000 is their own money. The carrier doesn't pay anything.

Isn't it better to pay $2,000, $3,000 or $4,000 a year and have a stand-alone LTC policy pay the bulk of the benefit not the policyholder?

Ive been asked this a few times here recently.
It all depends... mainly on the client. Im not saying that the LTCFA is the most comprehensive way to go, or the most efficient. I was merely pointing out why the product is attractive to clients; good, bad, or otherwise.

I have never once said that a LTCFA gives a better benefit than a traditional policy.

In fact, if a producer knows their annuity products, they can take that lump sum and create enough guaranteed cash flow to fund a LTCI policy and have some left over.
If they really know their annuity products they can leverage an even greater amount than LTCI alone.

Example:
55yo w/ $100k in assets.

$3500/year LTCI for a $300k pool of money

Opt 1: Throw $ into a spia = $5k per year. That leaves room for a 42% rate increase before dipping into other cash flow.


Opt 2: Right now you could take $100k and put it into a FIA/Income Rider w/ an 8% bonus. That gives you $108k.
You get an income of 4.5% at age 65 for the rider (this is Security Benefit).
- This gives you a 28% premium cushion.
-Also, this product doubles your income for LTC needs. So with a $4000 per month policy, you get a $375/month kicker. Thats a $20k addition over the 5 years.


Unfortunately not all clients are comfortable with all the moving parts of that solution.
And like it or not, the simplicity of the LTCFA appeals to some prospects who fall into that category. And as I have said before, a LTCFA is better than no LTC coverage at all.

 

[Mr_Ed]

previously posted by Bill Berry



I stand corrected Bill,
You're right;
Return of Premium is going the way of any elimination period shorter than 60 months and any daily benefit more than $50.00.

I also think some carriers are changing their age limits to 25 years or less and also doing away with a benefit period longer than 30 days.

Coinciding of course with rate increase requests of 100% a year.

I think it has something to do with either the lapse rates or global warming, but I'm not certain.

Boy, I yearn for the days when LTCi was in it's infancy.......

sometimes, arthur, you post the dumbest things.

 

[Arthur Rudnick]

originally posted by Mr_Ed

sometimes, arthur, you post the dumbest things

Thank you..............

Only sometimes?

 

[billberry12]

Maybe Arthur forget his meds again today.