Ohio National, a big variable annuity provider, exits the annuity business

[Allen Trent]

A life policy with a CI rider is no plan for long-term care.

It is not ideal, but it surely is a plan. No different than someone deciding to self insure the risk of damage to their car instead of paying for stand alone collision & comprehensive. It may not be the same as transferring the entire risk to an insurance company like stand alone LTC.

But, how can you say buying a $300,000 UL policy for $4,000 per year premiums that allows me to accelerate $12,000 per month of Chronic Illness not be a plan. that is 24 months of potential care that I may have only paid $40,000 or $80,000 for & if I never use it, have it pay $300,00 tax free to my heirs.

How is this not a plan---may not be the plan I want for myself. But how can I look down my nose at the 80,000 people per year that choose Accelerated hybrids as their plan or the agents that helped them.

BTW---I don't sell hybrids & pretty obvious you don't either, but for entirely different reasons

 

[Mr_Ed]

It is not ideal, but it surely is a plan. No different than someone deciding to self insure the risk of damage to their car instead of paying for stand alone collision & comprehensive. It may not be the same as transferring the entire risk to an insurance company like stand alone LTC.

But, how can you say buying a $300,000 UL policy for $4,000 per year premiums that allows me to accelerate $12,000 per month of Chronic Illness not be a plan. that is 24 months of potential care that I may have only paid $40,000 or $80,000 for & if I never use it, have it pay $300,00 tax free to my heirs.

How is this not a plan---may not be the plan I want for myself. But how can I look down my nose at the 80,000 people per year that choose Accelerated hybrids as their plan or the agents that helped them.

BTW---I don't sell hybrids & pretty obvious you don't either, but for entirely different reasons

CI riders don't allow for "standby assistance".
Most CI riders reduce the death benefit before calculating the monthly benefit.
A UL policy that is not guaranteed to stay in-force through age 100 is useless because it will require A LOT more premium later in life. (no guaranteed premiums for those people).
Instead of paying $4,000 per year for this $300,000 UL policy with CI rider, you could buy $500,000 of long-term care insurance for about $1,600 per year and do something smart with the other $2,400.

 

[Mr_Ed]

I believe the earth is round. Do you know something I don't? I have seen client statements where their CV accounts were credited with 3%, 4% or 11%. So, yeah, I do believe that is the case. Obviously, COI for the life insurance components is deducted from that.

It's just a shell game.
They "give 4% interest" with one hand and take away 3% (or more) through expenses and fees. And G-d forbid you actually try to take your money out, then you'll get hit with a huge surrender charge resulting in a net interest rate that's negative.

 

[Allen Trent]

CI riders don't allow for "standby assistance".
Most CI riders reduce the death benefit before calculating the monthly benefit.
A UL policy that is not guaranteed to stay in-force through age 100 is useless because it will require A LOT more premium later in life. (no guaranteed premiums for those people).
Instead of paying $4,000 per year for this $300,000 UL policy with CI rider, you could buy $500,000 of long-term care insurance for about $1,600 per year and do something smart with the other $2,400.

Yes, most CI riders reduce the Death benefit when a claim is filed, but there is no death benefit on a stand alone LTC, so how is that a bad thing?

Anyone buying a UL with CI rider should be utilizing the no-lapse guarantee to 120. IE: 55 year old $4k per year on $300k level face with $12k monthly CI ADB is no-lapse guarantee to 120. That premium is guaranteed in the contract. What is the premium guarantee in a LTC contract?

$500k of LTC for $1,600 yr seems like a math problem & another time bomb waiting to happen actuarially, unless you are quoting for a newborn. Quotes I have seen for a 55 yr old for $100k per year for 5 years run just over $3,000 per year without inflation riders, return of premium, etc.

Plus, the UL with CI rider covers several more risks like death, disability, emergency cash needs. So, I commend anyone that takes action toward this important topic. Now, if there are agents out there encouraging cancelling stand alone LTC in favor of hybrid, that is definitely wrong in my mind.

 

[Allen Trent]

It's just a shell game.
They "give 4% interest" with one hand and take away 3% (or more) through expenses and fees. And G-d forbid you actually try to take your money out, then you'll get hit with a huge surrender charge resulting in a net interest rate that's negative.

So, stand alone LTC has no surrender charge & gives the client back 100% of all the money they have paid? what is the interest rate on these stand alone LTC you sell?

 

[Mr_Ed]

So, stand alone LTC has no surrender charge & gives the client back 100% of all the money they have paid? what is the interest rate on these stand alone LTC you sell?

Even better.
With traditional long-term care insurance, you keep most of the money you'd have to pay for a hybrid. You don't have to worry about getting it back from the insurer, because you kept it in your own investments the whole time.

 

[Mr_Ed]

Yes, most CI riders reduce the Death benefit when a claim is filed, but there is no death benefit on a stand alone LTC, so how is that a bad thing?

Anyone buying a UL with CI rider should be utilizing the no-lapse guarantee to 120. IE: 55 year old $4k per year on $300k level face with $12k monthly CI ADB is no-lapse guarantee to 120. That premium is guaranteed in the contract. What is the premium guarantee in a LTC contract?

$500k of LTC for $1,600 yr seems like a math problem & another time bomb waiting to happen actuarially, unless you are quoting for a newborn. Quotes I have seen for a 55 yr old for $100k per year for 5 years run just over $3,000 per year without inflation riders, return of premium, etc.

Plus, the UL with CI rider covers several more risks like death, disability, emergency cash needs. So, I commend anyone that takes action toward this important topic. Now, if there are agents out there encouraging cancelling stand alone LTC in favor of hybrid, that is definitely wrong in my mind.

Yes, most CI riders reduce the Death benefit when a claim is filed, but there is no death benefit on a stand alone LTC, so how is that a bad thing?

Because the reduction in death benefit reduces the monthly benefit payable for "chronic illness".

Anyone buying a UL with CI rider should be utilizing the no-lapse guarantee to 120. IE: 55 year old $4k per year on $300k level face with $12k monthly CI ADB is no-lapse guarantee to 120. That premium is guaranteed in the contract. What is the premium guarantee in a LTC contract?

The premium is guaranteed to never be higher than new business rates (if the policy is purchased in one of the 41 states that have a Rate Stability Regulation). Plus the insurer has to reduce profits if they seek a rate increase. (if the policy is purchased in one of the 41 states that have a Rate Stability Regulation).


$500k of LTC for $1,600 yr seems like a math problem & another time bomb waiting to happen actuarially, unless you are quoting for a newborn.

Actually, that was for a 50-year old and an actuary is certifying that there are no planned premium increases for the life of the policy form, (if the policy is purchased in one of the 41 states that have a Rate Stability Regulation).

Quotes I have seen for a 55 yr old for $100k per year for 5 years run just over $3,000 per year without inflation riders, return of premium, etc.

You're looking at the over-priced LTCi policies then.

Plus, the UL with CI rider covers several more risks like death, disability, emergency cash needs. So, I commend anyone that takes action toward this important topic. Now, if there are agents out there encouraging cancelling stand alone LTC in favor of hybrid, that is definitely wrong in my mind.

Buy term and keep your own cash in your own investments.

 

[Allen Trent]

Because the reduction in death benefit reduces the monthly benefit payable for "chronic illness".

That is just not true. Most CI riders set the monthly max coverage amount at policy issue. A 300k face policy with 4% monthly CI rider will allow up to 12k ADB to be processed. If you did this max amount for 10 months, your CV would have reduced by 120k, your face amount would have reduced by 120k, but you max CI for the following month would still be 12k. Furthermore, if the face amount is level, the monthly COI deductions might be greatly reduced because the 120k ADB processed that lowered the net amount at risk face amount. I don't even sell this stuff & seem to better understand both products. You might need better training as all your standard reasons that hybrids are horrible just are not entirely accurate. I get you don't like them & I like stand alone LTC better, but I don't need to make stuff up to mislead consumers

 

[ltcadviser]

This is going to be good

https://i.giphy.com/media/LvaswPm6IHn44/giphy.gif

 

[Mr_Ed]

That is just not true. Most CI riders set the monthly max coverage amount at policy issue. A 300k face policy with 4% monthly CI rider will allow up to 12k ADB to be processed. If you did this max amount for 10 months, your CV would have reduced by 120k, your face amount would have reduced by 120k, but you max CI for the following month would still be 12k. Furthermore, if the face amount is level, the monthly COI deductions might be greatly reduced because the 120k ADB processed that lowered the net amount at risk face amount. I don't even sell this stuff & seem to better understand both products. You might need better training as all your standard reasons that hybrids are horrible just are not entirely accurate. I get you don't like them & I like stand alone LTC better, but I don't need to make stuff up to mislead consumers

Allen, you might want to read the Chronic Illness rider again.

With most Chronic Illness riders, at the time the chronic illness claim is made, the death benefit is re-calculated to its "present value" before calculating the 4% monthly benefit amount.

For example, if the death benefit is $300,000 and the insured activates the "chronic illness rider" in 2018, but the insured has an 8 year life expectancy, the death benefit would be decreased from $300,000 to about $205,000 (assuming a 5% interest rate). Therefore the 4% monthly benefit would be only 4% of $205,000, not 4% of the original $300,000. The insured loses that $95,000 difference.

Even worse, some policies reduce the $205,000 by the present value of the future premiums as well, making the death benefit (& monthly benefit) even smaller. For example, if the present value of the 8 years of future premiums was $30,000, then the $205,000 death benefit would be reduced to $175,000 and the 4% monthly benefit would be only 4% of $175,000.

G-d forbid someone with one of the "chronic illness riders" gets Alzheimer's and has a life expectancy of 15 years. That $300,000 death benefit would be reduced to present value (minus present value of all future premiums) to about $100,000.

Tell me, how are you going to explain to the spouse, that the policy you sold them that had a $12,000 monthly benefit, now, suddenly, almost magically, will only pay $4,000 per month for her husband's Alzheimer's care.

You're probably thinking, "I've never heard that before." That's why you need to stop listening to your MGA/BGA/IMO/FMO and start reading the actual contract.