What Would You Suggest?

Discussion in 'Long Term Care Insurance Forum' started by bluemarlin08, Mar 28, 2017.

  1. bluemarlin08
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    bluemarlin08 Well-Known Member

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    Would be interested in all your views as to the disadvantages of this product. The main one I hear from some commentators is loss of earnings on the money. I would assume these dollars are lazy dollars and invested very conservative. What are some others as well as your "concept" initial conversation?
     
  2. Mr_Ed
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    Mr_Ed Well-Known Member

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    there's only one disadvantage with a single pay product:

    time value of money.

    period.

    and, in most cases, the opportunity cost each year of the single pay product is greater than the annual premium for a traditional product.
     
  3. ltcadviser
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    ltcadviser Well-Known Member

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    Opportunity cost which has been mentioned; and asset-offset.
    Benefit is fixed cost structure.

    Traditional policy downside is rate increase risk.
     
  4. bluemarlin08
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    bluemarlin08 Well-Known Member

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    Every time I hear that I always think of "LEAP" presentations. Just curious, what interest rate do you use when showing lost opportunity cost, 5, 7%?
     
    Last edited: Apr 10, 2017
  5. pfg1
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    pfg1 Well-Known Member

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    Would you consider having no life ins death benefit in a traditional policy a downside also? Obviously its not a product designed for that, just curious on your thoughts.

    Most people have a segment of assets that are invested very conservatively... this type product imo, falls into that area. So the lost opp cost is minimal, when looking at the total picture.
     
  6. Mr_Ed
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    Mr_Ed Well-Known Member

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    conservative investments are generally earmarked for emergencies. that is why they pay low interest rates because they are liquid with no risk. why put that money into an non-liquid "investment".

    fyi... a single pay life/ltc policy is NOT an investment. it's very expensive life insurance.

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    the rate increase risk is very small and it's much smaller now than it was in the past.

    the opportunity cost is certain.

    a rate increase is not.

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    gimmeabreak.

    I ask the client what they expect to earn on their $.

    In most cases they say 3%.

    It's very easy to beat any single pay product once your client understands the opportunity cost, whether you assume 2%, 3% or whatever percent.

    the opportunity cost in the single pay products is huge.
     
  7. bluemarlin08
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    bluemarlin08 Well-Known Member

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    About what? You never heard of "LEAP"?

    You think a 3% lost opportunity cost is really all that significant for the potential LTC payout? We are talking Annuity/ LTC not Life/ LTC.
     
  8. Mr_Ed
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    Mr_Ed Well-Known Member

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    My position is that traditional LTCi is a much better value than any single premium combo product (e.g. Annuity/LTC or Life/LTC).

    If you could only earn 3% on the single premium you would be able to buy much better LTC benefits with the earnings than you'd get from the combo product.

    Anyone who understands the opportunity cost of the single premium product would never recommend it over a traditional product (except when underwriting prevents someone from qualifying for a traditional product).
     
  9. ltcadviser
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    ltcadviser Well-Known Member

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    I do not use any interest rate. Just discuss the issue. Each client will view their own respective opportunity cost differently dependent upon their source of funds, individual investment allocation and historical returns. A lot of clients assume 0%, anyway. They are using money sitting in their bank.

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    Not a downside, whatsoever.
    It is not priced to include death benefit.

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    Interesting stance. LIMRA market data is moving against you Scott, and has been moving against you for some time.
     
    Last edited: Apr 11, 2017
  10. Mr_Ed
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    Mr_Ed Well-Known Member

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    I've never used LIMRA market data to determine which policy is the best value for each client. And I've never been one to follow the crowd. The crowd is usually wrong.
     
    Last edited: Apr 11, 2017

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