Ltc - Mass Mutual Vs Northwestern - And Why

[Matt-Insurance]

Hi - hope everyone is staying safe and healthy.

My wife and I are both in our mid thirties and are looking to get whole life insurance that includes LTC. It would be a $250k whole life policy. Northwestern is quoting about $3,600 and Mass Mutual is quoting $3,100. My insurance broker is recommending Northwestern because in the long run they will have better returns and your policy will be worth more and that they have a higher credit rating - I get that - but it is also $500 more a year per policy so it should be worth more. So question - what am i missing? Am i supposed to go with Mass Mutual or Northwestern and why. thank you in advance. Also, what else should i be considering when i look for LTC insurance - e.g., state compatibility (or something like that which i saw on this forum)?

 

[DHK]

Welcome to the forum!

First, there is a difference between a chronic illness rider and true LTC insurance, particularly on how the benefits are treated by taxation and some other things.

That being said, there are so many nuances between companies, policies, and underwriting offers.

You are supposed to go with the agent and policy that makes the most sense for you and brings you the most clarity behind the decision. And yes, I know that you are in a competitive situation because Northwestern Mutual only uses captive agents, no brokers. MassMutual allows for brokers to write and service their business.

Btw, "Dividend selling" (promising higher returns) is, in my opinion, an unethical and ignorant reason to recommend a company/policy. It also shows the lack of knowledge in the industry itself. So I'll go ahead and call that out right now.

National Ethics Association

https://www.dynamicadvancedwealth.c...-life-insurance-dividend-payout-announcements

 

[kpbdy99]

Do you need whole life insurance? If you need the death benefit, what happens if you spend your death benefit on LTC? If you don't need life insurance, why are you paying for it to get inferior LTC protection? If you're in your mid-30s, there are NUMEROUS better ways to do this. If you don't want to go the traditional LTC insurance route, go with a Life & LTC hybrid that's going to at least give you better LTC protection. Neither the MM or NWL plans provide very good LTC protection in the long haul. You need to, first, decide what your planning priority IS, then look at all your options.

 

[ltcadviser]

Hi - hope everyone is staying safe and healthy.

My wife and I are both in our mid thirties and are looking to get whole life insurance that includes LTC. It would be a $250k whole life policy. Northwestern is quoting about $3,600 and Mass Mutual is quoting $3,100. My insurance broker is recommending Northwestern because in the long run they will have better returns and your policy will be worth more and that they have a higher credit rating - I get that - but it is also $500 more a year per policy so it should be worth more. So question - what am i missing? Am i supposed to go with Mass Mutual or Northwestern and why. thank you in advance. Also, what else should i be considering when i look for LTC insurance - e.g., state compatibility (or something like that which i saw on this forum)?

HI Matt,

Neither of these options are worth buying for LTC insurance needs.

Mid 30’s you need to look closely at this policy for starters if you want an LTC focused solution.

https://www.longtermcareinsurancepa...tters-ii-cash-indemnity-long-term-care-review.

If your primary objective is absolutely whole life, and LTC planning is not really important, more of an “oh by the way, what if?” I suppose you could consider the WL policies you are looking at, but in 15 years you will be needing to get separate policies if you become concerned about LTC in the future because these $250K WL policies with LTC riders aren’t going to work to address LTC.

 

[DHK]

Well, the WL policies total death benefit should be growing over time with dividends buying more paid up additions.

The problem is that (typically) these riders base their chronic illness payouts on remaining life expectancy. For mental cognition, there is almost no reduction in life expectancy. Doesn't mean you won't get a payout, but it may not last for as long as you need care.

If your focus is LTC and not everything else that whole life can offer... then I would get a true LTC policy.

However, if you want all the other economic advantages with the WL policy and the Chronic Illness rider is just an additional benefit... then go with that.

 

[ltcadviser]

Well, the WL policies total death benefit should be growing over time with dividends buying more paid up additions.

The problem is that (typically) these riders base their chronic illness payouts on remaining life expectancy. For mental cognition, there is almost no reduction in life expectancy. Doesn't mean you won't get a payout, but it may not last for as long as you need care.

If your focus is LTC and not everything else that whole life can offer... then I would get a true LTC policy.

However, if you want all the other economic advantages with the WL policy and the Chronic Illness rider is just an additional benefit... then go with that.

MM and NWML WL policies have true LTC riders based on 7702(b) LTC definitions not chronic illness. No worries whatsoever there.

 

[DHK]

MM and NWML WL policies have true LTC riders based on 7702(b) LTC definitions not chronic illness. No worries whatsoever there.

Might want to double check that:

https://fieldnet.massmutual.com/public/life/pdfs/icc13li9006.pdf

"The benefits of the LTCAccess Rider available through a Legacy Series policy could be appropriate for a policyowner who needs life insurance protection and is also looking for flexibility to access the policy’s death benefit to pay for long term care needs. If your only purpose for purchasing the policy with LTCAccess Rider is to pay for long term care expenses, you should consider other options."

"The LTCAccess Rider is not intended to be a federally tax-qualified long term care insurance contract under Section 7702B of the Internal Revenue Code (IRC), as amended. Therefore, the premiums payable for the rider are not deductible from gross income for federal income tax purposes."

Footnote on Page 3:
"The benefits provided by the LTCAccess Rider are intended to be excludable from federal gross income under Section 101(g) of the IRC. However to receive tax-free treatment, IRC section 101(g) requires that the payment of benefits be for costs incurred by the payee for covered long term care services."


MassMutual is otherwise out of the LTC stand-alone policy business.

https://insurance-forums.com/community/threads/massmutual-exiting-ltc-market-by-1-28-2021.103556/

Broker Insight: Products

 

[ltcadviser]

Might want to double check that:

https://fieldnet.massmutual.com/public/life/pdfs/icc13li9006.pdf

"The benefits of the LTCAccess Rider available through a Legacy Series policy could be appropriate for a policyowner who needs life insurance protection and is also looking for flexibility to access the policy’s death benefit to pay for long term care needs. If your only purpose for purchasing the policy with LTCAccess Rider is to pay for long term care expenses, you should consider other options."

"The LTCAccess Rider is not intended to be a federally tax-qualified long term care insurance contract under Section 7702B of the Internal Revenue Code (IRC), as amended. Therefore, the premiums payable for the rider are not deductible from gross income for federal income tax purposes."

Footnote on Page 3:
"The benefits provided by the LTCAccess Rider are intended to be excludable from federal gross income under Section 101(g) of the IRC. However to receive tax-free treatment, IRC section 101(g) requires that the payment of benefits be for costs incurred by the payee for covered long term care services."


MassMutual is otherwise out of the LTC stand-alone policy business.

https://insurance-forums.com/community/threads/massmutual-exiting-ltc-market-by-1-28-2021.103556/

Broker Insight: Products

I know this. You are confusing the two separate and distinct issues of income taxation guidelines and benefit eligibility triggers. This is referring to the tax deductibility of the premium not the actual benefit eligibility qualification triggers to receive benefits. The LTC riders will follow the standard IRC 7702B(c) language for benefit qualification triggers. That is the most important point and it is why these are LTC riders and not Chronic Illness riders. There will be no language with the MM LTCAccess rider or the NWML ACB rider regarding the permanent need for care or confinement that you will see with Chronic Illness riders. If you have questions you may call me at (800) 891-5824 to discuss.

 

[scagnt83]

My insurance broker is recommending Northwestern because in the long run they will have better returns and your policy will be worth more and that they have a higher credit rating - I get that - but it is also $500 more a year per policy so it should be worth more.

I will address this aspect and avoid getting into debating the value of the LTC Riders on the WL for the time being.

Ratings have nothing to do with policy performance or the Dividend paid. Any insinuation otherwise is inaccurate.

Also, the difference in Financial Ratings between Mass and NWM is so miniscule it should not be a consideration in this at all. Both have stellar ratings and to insinuate that one is significantly more stable than the other is inaccurate as well.

They have the exact same rating with 2 rating agencies (S&P & AM Best)
The other 2 put Mass just 1 or 2 levels down on a scale of 20+ levels.
Mass and NWM are among the top 0.5% of carriers for financial strength. Its like comparing a personal credit score of 797 vs a 798. Its an insignificant difference. To suggest otherwise is inaccurate and misleading.

(here are the ratings for MM and for NWM)

Financial Ratings are not an indication of the Dividend Rate, amount of Dividends paid, carrier's General Account performance, policy holder returns, etc.
And I mean they do not incorporate that data into their ratings at all. That is not what ratings are meant to indicate.

All a rating does is show how financially stable that carrier is. So in a time of crisis, a carrier with a higher rating should be a safer bet of not going into receivership vs. a carrier with a lower rating.

In fact, a carrier paying a lower dividend rate would result in more money retained in the carrier's General Account, which would help boost their financial ratings. Carriers actually make statements in their Dividend Announcements about "consideration of maintaining top financial ratings". Meaning they make sure their Dividend payments do not cause them to drop in the rating scale. There have actually been class action suits against the top mutual carriers such as MM/NWM/NYL/GL from policy holders who felt the carrier was too focused on maintaining top spots in ratings instead of paying out fair profits (dividends) to policy holders... and they have a point imo... being 1# out of 28 vs. being #2 is not a significant increase in safety for policy holders... so what does it benefit them to lose out on Dividends so a carrier can stay at the top level?

Now it is true that a strong financial rating does indicate a high likelihood the carrier will be able to sustain Dividends at meaningful rates moving forward. You certainly want to make sure a Dividend paying WL policy is from a well rated carrier. But the "best" financial rating in no way indicates the best policy performance.

As an independent agent, I sell WL from Mass, Guardian, Penn, NYL, & ON to name a few. The first 3 are my main WL carriers. But I do not pretend to know which will perform better over the next 20 years. There is no way to know. I can show you which illustrates the best at the current dividend rate. I can show you which carrier has had the most consistent dividends over the past 20 years (Penn). But I cant show you which will have the highest moving forward.

Not only that, but the "highest" dividend rate does not even mean the best policy performance. There are differences in Underwriting, so you might be the best health rating with one, but the 2nd best with another. There are differences in internal policy fees. Differences in Rider fees. There are a lot more variables than just the Dividend Rate when comparing policy performance.

Also, you dont have an apples to apples comparison to make your decision!!
That is not the proper way to compare WL policies on a "performance" basis in regards to premiums paid. You must use the same Premium. Agents can run illustrations at exact premiums, so request that instead of an exact DB. Also ask them to include a "Rate of Return" section in the illustration. This shows the rate of return on the premiums paid for both CV and DB. Both carriers allow this option in the illustration software, so ask for it if they didnt include it. That at least gives you a way to do a true comparison for part of it without equal premiums.

To summarize, the difference in ratings should not be part of the conversation at all in this matter. Anyone pushing that difference as a selling point is not providing an accurate representation of how the policy works, or the differences in the carriers.

 

[scagnt83]

Well, the WL policies total death benefit should be growing over time with dividends buying more paid up additions.

The problem is that (typically) these riders base their chronic illness payouts on remaining life expectancy. For mental cognition, there is almost no reduction in life expectancy. Doesn't mean you won't get a payout, but it may not last for as long as you need care.

If your focus is LTC and not everything else that whole life can offer... then I would get a true LTC policy.

However, if you want all the other economic advantages with the WL policy and the Chronic Illness rider is just an additional benefit... then go with that.

Its important to point out that Mass/Guardian/NWM do not go by total DB for the LTC Rider. They use a separate benefit pool calculation that can increase the monthly benefit, but not the total benefit pool. It is part of the DB/NAR, but does not grow like it or the CV.

I am not a huge fan of the WL LTC Riders. I prefer a Rider that uses total DB. Its clear cut as to what you get. And imo is often a better value for the money in terms of LTC protection. Especially for someone under the age of 50. Inflation will eat away at the WL riders.