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.
To learn more about the changes in LTC Insurance check out our new ebook - LTCI 2.0.