Do you have clients looking for guarantees in Long-Term Care Insurance (LTCI)? If so, for many of you the “knee jerk” reaction is often to go straight to a hybrid or linked benefit solution. If that’s YOU, read on!
Note: some of this may be “counter intuitive” to some of you, but Return of Premium riders and a Society of Actuaries study show traditional, standalone LTCI is a great solution for many of your clients! Let’s look at an example…
A NY single male age 55 compares a Prudential GUL with Chronic Illness Rider against a Mutual of Omaha traditional LTCI plan:
The Pru GUL is at preferred rate, $6K/month, $300K pool, no inflation – Premium is $4,485.00
The Mutual of Omaha LTCI is at Select rate, $6K/month, $300K pool, no inflation
- Premium without any Return of Premium is $1,366
- Premium with “3x MMB” ROP ($18K return upon death) is $1,534
- Premium with full ROP, less claims paid out, is $3,129 (still 30% less than hybrid option!)
Make no mistake, if your client needs (or wants) a substantial death benefit, the hybrid solution may be the best solution.
However, keep in mind what we are illustrating here; that is, what is the “best” LTC planning solution for the client who is mainly concerned about either (a) “what if I never use it?” or (b) “will rates go up?”
Additional advantages to consider in this Mutual of Omaha comparison:
- In pretty much every instance, standalone LTCI will provide a better benefit to premium dollar ratio.
The Society of Actuaries did an LTCI pricing study in November 2016, click here to learn more!
- The study found that folks that purchase LTCI today have only a 10% chance of receiving 1 rate action in their lifetime. And, if one is in that 10%, the projected rate increase is only 10%. In summary, future rate actions are largely “baked in the cake”!
- Many states have a tax credit or deduction when purchasing LTCI. In NY, it’s a 20% dollar for dollar credit. That takes the full ROP MOO quote from $3,129 down to $2,503 after the credit. That’s a savings below the GUL quote of 44%!
- Waiver of Premium immediately after elimination period is satisfied, GUL is after 25 months.
- No need for a paramed exam. A paramed may be needed with Life/Hybrid.
- Most Chronic Illness Riders in NY require an expectation of permanence to trigger benefits; not so with LTCI.
So, the next time you have that client concerned about rate stability and a guarantee that if they don’t have an LTCI claim that they will get all of their premiums back…take a closer look at standalone LTCI!
Want a similar comparison for your client? Contact the LTC Sales Solutions Team today!