Partnership vs. Long Term Care Hybrid Plans

[InsureGuy5]

I am seeing a lot of interest in hybrid long term care plans, but by rule these policies cannot be partnership qualified as well. In my mind, that distinction can make traditional LTC plans more attractive.

Does our industry need to make a push to try to make hybrid plans partnership qualified as well? What do you think is holding it back? Why isn't this an easy fix if governments want to incentivize LTC purchases?

 

[DHK]

Does our industry need to make a push to try to make hybrid plans partnership qualified as well? What do you think is holding it back? Why isn't this an easy fix if governments want to incentivize LTC purchases?

Won't happen. Governments are in such debt, that they don't want to incentivize LTC plans that can leave the state on the hook for the balance of care costs after benefits are exhausted without being able to go back and get more assets after they are deceased.

California only has two companies that are "Partnership Certified"... and only one that can be sold by agents... that has had financial troubles themselves.
Partnership-certified companies | California Partnership for Long Term Care

I could be wrong, but I think California "pioneered" the 'partnership" concept... and they are practically abandoning it (as are companies that are no longer offering LTC).

Hybrid or just using Chronic Illness riders on life policies, I think, is the future of LTC planning. They are not "true" tax-qualified policies, but you get many more dollars doing more things and those dollars can be leveraged far better through a life policy than a stand-alone LTC policy.

 

[Mr_Ed]

Hybrid or just using Chronic Illness riders on life policies, I think, is the future of LTC planning. They are not "true" tax-qualified policies, but you get many more dollars doing more things and those dollars can be leveraged far better through a life policy than a stand-alone LTC policy.[/QUOTE]

Can you provide a real-life example where someone can get better leverage through a hybrid policy than a traditional LTCi policy?

I've asked about 100 agents to give me a real-life example of this and none of them have been able to do it.

 

[DHK]

Can you provide a real-life example where someone can get better leverage through a hybrid policy than a traditional LTCi policy?

I've asked about 100 agents to give me a real-life example of this and none of them have been able to do it.

If you buy a single premium life policy with $100,000... that double the death benefit to $200,000... and that $200,000 can be accessible for Chronic Illness or to be passed on to beneficiaries income-tax free.

You might say that "Well, that "cost" you $100,000 instead of a true LTC policy for $10,000 a year that could provide a greater benefit." And you'd be correct (aside from the fact that you can still borrow against the policy - even though it could be taxable interest, but interest rates are so low that it's a non-issue). But, in my example, if the money isn't used for LTC purposes, it still is an increased tax-free death benefit and the money in the policy would earn at least as much as bank CDs or more. Unless there's an ROP feature on traditional LTC policies, you can't make the same claim.

Is that a "real life" example? Yes and no. I suppose it just depends on your definition of what "leverage" means to you.

 

[Mr_Ed]

If you buy a single premium life policy with $100,000... that double the death benefit to $200,000... and that $200,000 can be accessible for Chronic Illness or to be passed on to beneficiaries income-tax free.

You might say that "Well, that "cost" you $100,000 instead of a true LTC policy for $10,000 a year that could provide a greater benefit." And you'd be correct (aside from the fact that you can still borrow against the policy - even though it could be taxable interest, but interest rates are so low that it's a non-issue). But, in my example, if the money isn't used for LTC purposes, it still is an increased tax-free death benefit and the money in the policy would earn at least as much as bank CDs or more. Unless there's an ROP feature on traditional LTC policies, you can't make the same claim.

Is that a "real life" example? Yes and no. I suppose it just depends on your definition of what "leverage" means to you.

For $10,000 per year, a 60-year old female could buy a $12,000 monthly benefit totaling $876,000 of long-term care insurance and those benefits would grow every year by 3% compounding. Why is that a fair comparison to a hybrid that would only pay $200,000 of long-term care benefits?

If you're going to compare a hybrid policy with $200,000 of long-term care benefits, shouldn't you compare a traditional long-term care insurance policy with $200,000 of long-term care benefits?

A 60 year old female could buy $200,000 of long-term care insurance (with no inflation benefit) for only $2,587. If she can earn 3% on that $100,000, she'd be better off buying a traditional LTCi policy.

NEVER* Combine Long-Term Care Insurance with Life Insurance – LTCShop.com



mr_ed

 

[DHK]

As I said - it depends on your definition of leverage.

You're looking at it from a LTC planning perspective.

I'm looking at it from a dormant $100,000 in taxable/inheritable CDs that isn't doing anything perspective.

Neither is right or wrong, but either way, insurance is a form of leverage.

CA Partnership policies, which are designed to shelter assets for a MediCal/Medicaid eligibility, is an estate preservation tool. Unless you buy a lifetime benefit, you are simply buying what you can afford, and, should you get on claim, you exhaust the benefits and then you go on Medicaid.

The problem that I'm having with partnership policies... is that there is only ONE company in California that I can sell for that plan. Most companies are pulling out or exiting that marketplace. With that in mind, I look to where I can do the best good for clients. Being able to combine death benefits with Chronic Illness is a better solution for the reality of the direction of the marketplace.

 

[Mr_Ed]

As I said - it depends on your definition of leverage.

You're looking at it from a LTC planning perspective.

I'm looking at it from a dormant $100,000 in taxable/inheritable CDs that isn't doing anything perspective.

Neither is right or wrong, but either way, insurance is a form of leverage.

CA Partnership policies, which are designed to shelter assets for a MediCal/Medicaid eligibility, is an estate preservation tool. Unless you buy a lifetime benefit, you are simply buying what you can afford, and, should you get on claim, you exhaust the benefits and then you go on Medicaid.

The problem that I'm having with partnership policies... is that there is only ONE company in California that I can sell for that plan. Most companies are pulling out or exiting that marketplace. With that in mind, I look to where I can do the best good for clients. Being able to combine death benefits with Chronic Illness is a better solution for the reality of the direction of the marketplace.

What a bunch of insurance mumbo jumbo.

DHK: As I said - it depends on your definition of leverage.
Horse: Last time I looked, $2,500 per year buying $200,000 of benefits is better leverage than $100,000 buying $200,000 of benefits.

DHK: You're looking at it from a LTC planning perspective.
Horse: Since we're talking about LTC planning shouldn't LTC planning be our perspective?

DHK: I'm looking at it from a dormant $100,000 in taxable/inheritable CDs that isn't doing anything perspective.
Horse: If they have $100K in taxable CD's why not put the $100K into tax-free muni bonds? Better return! No taxes! Safety! No brainer. Use the interest payments on the muni-bonds to pay for a nice long-term care policy.

DHK: Neither is right or wrong, but either way, insurance is a form of leverage.
Horse: Traditional LTC insurance provides MUCH better leverage than a single-premium hybrid.

DHK: The problem that I'm having with partnership policies... is that there is only ONE company in California that I can sell for that plan.
Horse: The California Partnership sucks. Why not just sell a traditional LTCi policy. A healthy 60-year old couple can buy $1,000,000 of LTC insurance benefits for about $225 per month per spouse.

DHK: Most companies are pulling out or exiting that marketplace. With that in mind, I look to where I can do the best good for clients. Being able to combine death benefits with Chronic Illness is a better solution for the reality of the direction of the marketplace.
Horse: You come to that conclusion only because you're comparing a long-term care insurance policy with 5% inflation protection to a life insurance policy that has ZERO inflation protection. Why would you think that's a fair comparison?


Five Reasons to Buy Long-Term Care Insurance Instead of a “Hybrid” – LTCShop.com


mr_ed

 

[DHK]

Since we're talking about LTC planning shouldn't LTC planning be our perspective?

The OP asked about making hybrid plans partnership qualified and lobbying to do so. I simply talked about reasons why states won't (but I'm allowed to be wrong).

State Data Lab

That's a conversation about economics affecting LTC planning and policies, not LTC planning in and of itself for an individual.

You turned it to individual LTC planning and you asked me about a "real life example" of something better than what you're talking about.

 

[Mr_Ed]

The OP asked about making hybrid plans partnership qualified and lobbying to do so. I simply talked about reasons why states won't (but I'm allowed to be wrong).

State Data Lab

That's a conversation about economics affecting LTC planning and policies, not LTC planning in and of itself for an individual.

You turned it to individual LTC planning and you asked me about a "real life example" of something better than what you're talking about.

In your opinion, wouldn't it make more sense for a 60-year old couple in CA to buy a million dollars of LTC insurance for about $225 per month per spouse rather than turning $100K over to an insurance company per person, for only $200K of benefits per person?

 

[DHK]

In your opinion, wouldn't it make more sense for a 60-year old couple in CA to buy a million dollars of LTC insurance for about $225 per month per spouse rather than turning $100K over to an insurance company per person, for only $200K of benefits per person?

I think it could make a lot of sense to do BOTH, depending on how the numbers work out, underwriting, etc. LTC for care and the SPWL to multiply and pass on the asset for beneficiaries.