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1 Confidential and Proprietary
1
Traditional vs. Hybrid LTC insurance
Understanding the Options
Tony Stratidis Managing Partner
MS Consulting Group LLC
“Linked-benefit LTCI is neither better, nor worse than traditional LTCI …
… it’s simply a different way to pay.“
3 Confidential and Proprietary
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Traditional LTCi Traditional LTCI
“Defined Benefit” 4 key benefit decisions drive the premium
1. Benefit Amount 2. Benefit Period (pool of $) 3. Inflation: 2%, 3%, 4%, 5% compound or simple 4. Elimination Period (Deductible)
Partnership eligible (with proper inflation)
4 Confidential and Proprietary
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Advantages & Disadvantages of Traditional LTCI
• Flexibility in plan design and premium control • Tax-deductible premiums • On-going premium (some limited pay options
still available) • Premiums can increase • Tighter Underwriting • Partnership: Protection of Assets • Peace of Mind
Linked-Benefit LTCI Also referred to as:
– Hybrid product; Linked – Asset-based; Combo
Different from Life Policies with Accelerated Death Benefit (ADB) Rider • Life-linked – WL & Universal –
Indemnity & Reimbursement • Annuity-linked
Linked-Benefit LTCI “Defined Contribution” •The premium determines the benefit
– Can “back-into” the premium • Payment Options:
– Single-premium – Limited & annual-pay options – Lifetime Pay
•Guarantees – No “Rate Increase” – Interest Rate – Death Benefit – Lifetime Benefits available
Things to keep in mind with Linked-Benefit LTCI
Can be more expensive than traditional LTC May not produce enough benefit No tax deduction of premium Limitations by State approval Not Partnership eligible
• Stuck on “Use it or Lose it”syndrome • Against annual premium “expense” • Concerned about future Rate Increases • Wants to “Self-insure”
– “Smarter way to self-insure.” - Leverage – “Reposition” portion of emergency funds
• NOT concerned w/Partnership asset protection
Client Profiles that Gravitate to Hybrid LTCi
LIFE INSURANCE AND LTC COMBINED…HOW DOES IT WORK
“3-Buckets” • Single premium most common
– Limited pay available • “Pre-packaged” CoB (or “Extension of Benefits”)
Premium $100,000
CV
Death Benefit
$200,000
LTCI Benefit $500,000
($7000/mo x 6 years)
LIFE INSURANCE AND LTC COMBINED…
HOW DOES IT WORK
Asset Based vs. Traditional LTC Products Underwriting
Traditional LTC: Morbidity Based Health History Application Attending Physicians Statements (APS) Phone History Interview (PHI) Face To Face Interviews Paramedic Exam – most carriers now requiring
Asset Based LTC: Morbidity & Mortality Based <$250K Death Benefit – underwritten off application only Health History Application Attending Physicians Statements (APS) Paramedic Exam
Case Study 1: Lifetime Payment
Plan Design: Client: Traditional LTC Hybrid Mr. Jones – age 58 $5,530.00 $6,300.00 Ms. Jones – age 55 Benefit Plan 4 Year 50 Month $6000 Monthly Benefit 3% Compound Inflation 60 Day Elimination Period
Case Study 2: 10 Year Pay Option
Plan Design: 10 Year Pay with Return of Premium Client Traditional LTC Hybrid Mr. Jones – age 58 $10,777.71 $21,000.00 Ms.Jones – age 55 Benefit Plan: 4 Year 50 Month $6000 Monthly Benefit 3% Compound Inflation 60 Day Elimination Period Premium Returned $107,777.10 $297,661.00
Case Study 3: Single Premium Option
Client: Traditional LTC Asset Based Mr. Jones – age 58 N/A $175,000 Ms. Jones – age 55 LTC Benefit 4 Year 50 Month $6000 Monthly Benefit 3% Compound Inflation 60 Day Elimination Period Premium Returned $290,244 Death Benefit N/A $290,244
Client Wants Lifetime Benefits:
Plan Design: Single Premium Client: Traditional LTC Asset Based Mr. Jones – age 58 N/A $225,683.28 Mrs. Jones – age 55
Lifetime Monthly Benefit Plan $6000 Monthly Benefit
3% Compound Inflation 60 Day Elimination Period
Premium Returned $290,244.00
Anthony C. Stratidis, CLTC, LTCP
Managing Partner MS Consulting Group LLC Long Term Care Planning Consultants Phone: 1.800.991.5198
email: [email protected]