How would you like to pay long-term care insurance premiums for just 10 years and be done (while the benefit continues to increase)? Recently, I was asked by an advisor to assist one of his clients who was interested in 10-pay plans because their parents had bought plans and were happy with their choice.
For those who can afford it, limited pay LTC plans can be very appealing. Once offered by many long-term care carriers, now just a couple of companies offer standalone limited pay plans. However, linked Life/LTC carriers are branching out from single pay plans to options such as 10-pay products.
Here's a real life comparison of standalone and linked life/ltc plans with 10-pays. These are actual premium numbers, with the names of the carriers withheld.
Mr Client: Age 40 Mrs. Client: Age 40. State: Georgia
| Plan Benefits |
Carrier 1 | Carrier 2 | Carrier 3 | Carrier 4 |
| Type of Product | Standalone LTCi | Standalone LTCi | Linked Life/ltc | Linked Life/LTC |
| Initial Monthly LTC Benefit | $6,000 | $6,000 | $6,000 | $6,000 |
| Automatic Inflation Rider | 3% compound | 3% compound | 3% simple | 3% compound |
| Monthly Benefit Age 80 | $19,002 | $19,002 | $13,020 | $19,572 |
| Total LTC Benefit Pool at Age 80 | $912,104 | $912,104 | $637,920 | $912,104 |
| Life Insurance Benefit | None | None | $144,000 | $144,000 |
| Annual Premium Mr. | $3,810 | $5,328 | $8,416 | $7,852 |
| Annual Premium Mrs. | $3,765 | $8,798 | $7,502 | $8,461 |
What should the client do? Here are some thoughts:
- If they are a business owner of a C-corporation, they can deduct the entire premium of standalone coverage. Corporations can also "carve out" groups of executives. In this case, standalone coverage will be tough to beat.
- Carrier 1 offers unisex pricing while most carriers have gender based premiums.
- Carrier 3 offers an idemnity or cash LTC benefit - for great flexibility at claim time.
- The premiums for the linked life/ltc products are guaranteed, which the LTC products could be subject to a rate increase - but only during the 10 year premium pay period.
Regardless of the choice, the premiums don't come cheap. However, the peace of mind of owning a fully paid up LTC policy with almost a million dollars in available benefits can be appealing!
