Many clients find that the best way for them to plan for LTC is by purchasing a linked life/ltc plan. Compared to traditional LTC policies which provide pure long-term care protection (and the most LTC protection per premium dollar) linked Life/LTC trade off some of that leverage to provide guaranteed premiums and a life insurance benefit.
The current pandemic has increased awareness of long-term care and the need to plan. It has also had broader economic impact in the form of higher unemployment and lower long-term interest rates.
Those lower long-term interest rates can have a dramatic impact on the performance of an insurance carriers reserves - especially on single-premium life/LTC products. If you are a financial professional, it is critical to let you clients know of the changes and impact.
To give an example, let's say a 60 year old single woman in Ilinois is interested in repositioning some assets from investments into a single premium hybrid life/LTC plans. She's working with an advisor who has narrowed down the choices to two carriers, and decided the ideal single premium would be $100,000.
The advisor worked with their brokerage general agency who provided this side-by-side comparison of LTC Benefits. Note: These are actual premiums from currently available products and carriers.
|Linked Life/LTC Carrier Option 1||Linked Life/LTC Carrier Option 2|
|Initial Monthly LTC Benefit -(use for home or LTC facilities||$4,000||$3,435|
|Initial LTC Total Benefit||$254,847||$218,891|
|Long-Term Care Benefit Period||5 Years||5 Years|
|LTC Inflation Option||3% compound||3% compound|
|Monthly Benefit at Age 90||$9,701||$8,340|
|Total Benefit Pool at Age 90||$618,600||$531,307|
|Cash Surrender Value Age 90||$70,000||$102,303|
|Type of Policy||Expense Reimbursement||Cash Indemnity|
|Current Single Premium||$100,000||$100,000|
|NEW Premium||Approx $120,000 for applications received after June 26th, 2020||Approximately $113,500 for applications received after July 17th, 2020|
For these particular clients, their decision will based on whether they want more LTC benefit per premium dollar from the reimbursement products or a little less benefit but the flexibility of a cash plan. In the above example they may also be interested in the higher cash surrender value (in case they change their mind) of carrier 2 as well.
However, regardless of what decision they make one thing is clear - they can save substantially by purchasing now instead of waiting until later this year. Because of the extreme low interest rate environment, carrier 1 is increasing single premiums about 20% for applications received after June 26th and Carrier 2 is increasing single premiums about 13.5% for applications received after July 17th.
Both these carriers offer other premium payment options such as 10-pay which will be subject to new pricing but won't be as adversely impacted.
It's always a good time to plan for long-term care - but it may be an especially good time to consider LTC Insurance because plans may never again be such a great value.