Your 5 Best Hybrid Long Term Care Plans To Review in 2020
- Thread starter ltcadviser
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ComfortLTC
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It's time to stop using the phrase "use it or lose it" regarding Traditional LTCI in comparison with Hybrid LTCI in any form.
While the concept is generally true that if you pay premiums for many years and never have the covered event occur, you get nothing back, but it's grossly disingenuous - especially for an insurance professional - to suggest that you have "lost" your premiums. No, you paid premiums for coverage and peace of mind that if the risk did occur the coverage was there. That's also the nature of paying a premium to cover any "pure" insurance risk; pay as small a premium as possible for as much benefit as possible if the risk occurs.
When used in comparison to Hybrid LTCI, it's an unfair statement because it must be considered in context, in comparison to the entire package of total premiums paid (or not), the cost of money (time value of money), and the overall net benefits in different scenarios. Hybrid LTCI designed with EQUAL LTCI benefits is MUCH MORE expensive - not just a little more - than T-LTCI.
(Current client case: Couple 67/62: T-LTCI = $7,000/year. Equal Hybrid LTCI premiums (life-pay) = $15,000/year. The couple could by a separate amount of equal life DB - which they don't need - for an additional $3,200/year, guaranteed.)
Hybrid LTCI has its uses and benefits, but it's NOT a better deal just because you get something back if you never need care. You pay extra - a lot extra - for that right. There is a cost to the death benefit, there is a cost to having cash value, and there is a cost to the premium guarantees. Most Hybrid LTCi marketing that dismisses T-LTCI as "use it or lose it" is nothing but marketing hype - great marketing, but it fails to fully compare ALL of the costs and all of the comparative benefits.
BTW, while it's true that T-LTCI premiums are not guaranteed, it is also true that for new business as priced and written today (and since about 2014) THE FUNDAMENTALS HAVE CHANGED. You cannot project into the future on new-business premiums the same degree of premiums increases on older blocks of business. ALL of the past pricing mistakes - including those that are still being corrected for in new in-force increases right now - are already corrected-for, already baked-into the new business premiums.
In my analysis of multiple ages and different types of Hybrid LTCI policies, the ONLY time that Hybrid LTCI may provide a better total, net benefit is if the insured(s) dies never needing care. And even then the net cost has to be compared to the value of the investments retained by paying less for T-LTCI.
IF the goal is to plan for CARE, shouldn't the focus be on if you need CARE, not if you don't need care?! Most Hybrid LTCI plans pay the first two-years of LTCI benefits from the base death benefit (and cash value) first. So a less-than average, 2-year LTCI claim consumes all but a token amount of death benefit and ALL the cash value. Therefore shouldn't we saying in this example that Hybrid LTCI is "use it AND lose it"?! Well, but you got your money back in claims ... yes, but at what price? A HUGE markup to buying the same benefit with T-LTCI.
BTW, in my analysis I look at both a 3% cost of money/savings earnings rate and a 1% rate. I also project a total of 42% in future rate increases on the T-LTCI premiums which is FOUR-TIMES what the Society of Actuaries say would ever be needed on new-business pricing IF a rate increase were ever needed. T-LTCI always wins if you ever need CARE, and the "loss" if you don't isn't as dramatic as you might think.
While the concept is generally true that if you pay premiums for many years and never have the covered event occur, you get nothing back, but it's grossly disingenuous - especially for an insurance professional - to suggest that you have "lost" your premiums. No, you paid premiums for coverage and peace of mind that if the risk did occur the coverage was there. That's also the nature of paying a premium to cover any "pure" insurance risk; pay as small a premium as possible for as much benefit as possible if the risk occurs.
When used in comparison to Hybrid LTCI, it's an unfair statement because it must be considered in context, in comparison to the entire package of total premiums paid (or not), the cost of money (time value of money), and the overall net benefits in different scenarios. Hybrid LTCI designed with EQUAL LTCI benefits is MUCH MORE expensive - not just a little more - than T-LTCI.
(Current client case: Couple 67/62: T-LTCI = $7,000/year. Equal Hybrid LTCI premiums (life-pay) = $15,000/year. The couple could by a separate amount of equal life DB - which they don't need - for an additional $3,200/year, guaranteed.)
Hybrid LTCI has its uses and benefits, but it's NOT a better deal just because you get something back if you never need care. You pay extra - a lot extra - for that right. There is a cost to the death benefit, there is a cost to having cash value, and there is a cost to the premium guarantees. Most Hybrid LTCi marketing that dismisses T-LTCI as "use it or lose it" is nothing but marketing hype - great marketing, but it fails to fully compare ALL of the costs and all of the comparative benefits.
BTW, while it's true that T-LTCI premiums are not guaranteed, it is also true that for new business as priced and written today (and since about 2014) THE FUNDAMENTALS HAVE CHANGED. You cannot project into the future on new-business premiums the same degree of premiums increases on older blocks of business. ALL of the past pricing mistakes - including those that are still being corrected for in new in-force increases right now - are already corrected-for, already baked-into the new business premiums.
In my analysis of multiple ages and different types of Hybrid LTCI policies, the ONLY time that Hybrid LTCI may provide a better total, net benefit is if the insured(s) dies never needing care. And even then the net cost has to be compared to the value of the investments retained by paying less for T-LTCI.
IF the goal is to plan for CARE, shouldn't the focus be on if you need CARE, not if you don't need care?! Most Hybrid LTCI plans pay the first two-years of LTCI benefits from the base death benefit (and cash value) first. So a less-than average, 2-year LTCI claim consumes all but a token amount of death benefit and ALL the cash value. Therefore shouldn't we saying in this example that Hybrid LTCI is "use it AND lose it"?! Well, but you got your money back in claims ... yes, but at what price? A HUGE markup to buying the same benefit with T-LTCI.
BTW, in my analysis I look at both a 3% cost of money/savings earnings rate and a 1% rate. I also project a total of 42% in future rate increases on the T-LTCI premiums which is FOUR-TIMES what the Society of Actuaries say would ever be needed on new-business pricing IF a rate increase were ever needed. T-LTCI always wins if you ever need CARE, and the "loss" if you don't isn't as dramatic as you might think.
- Thread starter
- #3
Bill, Sell to your clients what you want to sell to them.
Here is the greater challenge with the traditional LTC landscape today.
There aren't enough diversity of underwriters to get applicants approved, and very few underwriters actually offer affordable traditional LTC premiums.
There are only 8 traditional underwriters:
Mutual of Omaha - well priced, but underwriting is difficult in certain situations
National Guardian-well priced, but underwriting is difficult as well.
Thrivent - mediocre priced, Christian organization
Transamerica - mediocre priced
Mass Mutual - Expensive
NY Life - Expensive, captive
Northwestern Mutual - Expensive, captive
Bankers Life - captive.
The reality is for independent agents we only have 2 viable underwriters left in the traditional arena for most of our clients: Mutual of Omaha and National Guardian Life. Everything else in traditional sucks for clients. And Mutual of Omaha is still using 2013 pricing even though treasury yields are markedly lower today. So, not sure how much longer Mutual of Omaha can sit on its current pricing before it elects to re-file. I cross my fingers every day that I don't wake up to an email from Mutual of Omaha stating it will be filing for new rates.
So, while you can over-analyze net present value of premiums until the day you die, the reality is we need to get our clients approved for the long term care benefits that they want, with the type of insurance policy that they want to apply for.
Newsflash: In the current landscape clients are gravitating to the hybrid policies.
- Thread starter
- #5
- Thread starter
- #6
And today is the day. Mutual of Omaha rate increase is coming
Can you say "Fire Sale"?
- Thread starter
- #8
Sure. If you like writing traditional policies. I’m not participating in it. Got NBA and NHL playoff games to watch.Can you say "Fire Sale"?
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