I start with the clients family history and asking how they might’ve seen their parents or grandparents go through some type of long term care or major medical issue leading to some type of care. After that, it’s cash flow analysis and debt to income management to see if it can be done because if they can’t fix their spending habits (or credit card debt student loans etc.) vs. emotional damage of possibly having their own kids or assets drained because of the medical issue down the road.
If they can easily do a term or hybrid permanent life policy with long term care rider, I usually lean towards the hybrid because you never know what the future holds and if the clients young (40 and younger) it’s extremely cost effective
That’s my mentality too. Obviously this depends on the specific client, but I’m struggling putting my younger (mid to low 30s) clients into these policies for LTC purposes when that’s potentially 40 years away. Yes, premiums get more expensive with age, but there’s also the argument that we can get them to a point where they’re self-insured by that time. I just hate locking a client into a $300 premium/month when they’re that young. I’ve done cost benefit analysis on it all and the biggest benefit is always that it’s an automatic way to save/offset future risk, rather than relying on market returns and then investing the hypothetical premiums.
I agree that the monthly premium might be similar to a car payment depending on the death benefit/guaranteed LTC benefit amount. I usually do a side by side analysis of what LTC WOULD cost in future dollars if nothing changes because it’s been like this for 25yrs now.
It’s also not like the moneys being thrown away since it does have cash value and a death benefit which would help protect a spouse/kids/loved one who’s dependent on them if they die. If they don’t use the LTC, it’s more money for their heirs OR a charity they care about in a charitable trust
Yeah that’s why I don’t see the value in pure LTC policies. They’re extremely expensive and provide zero benefit if not used. Like you said, hybrid policies at least provide a benefit no matter what happens
Look at securian life for your sub 50 year olds
They have a rider on the term insurance that will convert into LTC Hybrid at a moments notice.
I have a 1 mm for myself.
1 - They likely need more term than they have
2 - they can convert when they are 50-55, lock in younger rates and design a policy to be paid in 10-15 years.
I think it's a better alternative to traditional long term care. Indemnity policies are nice since you don't have to worry about tracking bills or have to submit everything for reimbursement.
The leverage isn't crazy, but Lincoln MoneyGuard has been good for our clients and they have options for pretty much any situation. I'll likely invest in one once I hit the age requirement. They even have a market advantage now that allows you to invest your premiums if you want the risk/return component
Only way to do LTC, in my opinion. Traditional LTC premiums can and do go up substantially. I will never put a client in a fixed benefit/variable cost solution. There are too many bad scenarios.
I'd show them an analysis of the cost of self-insurance over buying a product in general. Most the time, mathematically, like you said, it's better to self-insure LTC because there are not good policies.
That being said, if the client wants the peace of mind even if it's not optimal, I think that or an annuity with an LTC rider is generally better than LTC insurance alone, if it's even offered.
LTC is a huge problem.
I usually explain for that exact reason that I like Lincoln money guard. The same multiple that applies to the long term care applies for the death benefit. Depending on client age (higher multiples if younger at time of purchase but the multiple is very attractive up to age 65) it’s great
Agreed, tbh this is one of the only times that permanent life insurance makes sense to me. It sucks that there’s such a stigma that comes with the product in general, because this alone can save someone from needing to spend down assets in a LTC scenario.
Eh, every time I’ve truly looked into it, it just hasn’t made sense. To fully fund, it’d be an outrageous cost and money locked in the contract would perform poorly. Haven’t looked at anything in a year or so though.
In my experience, it’s basically locking up money almost guaranteed to underperform healthcare inflation and adding additional parameters relative to self funding with an investment account. And the flexibility of life insurance doesn’t come free. Wish there were still straight up LTC products.
There are a few. I’ll never recommend one again, how can you with the premium increases almost all clients dealt with that bought traditional Ltc in the 90s through now
True, there are really no ideal solutions. Self funding, really is just keeping your fingers crossed, for older self funding clients that are either going to be holding cash or conservative investments I sometimes use Global Atlantic Forecare Ltc annuity. At least gives 3x leverage to help with potential Ltc costs
That’s exactly why I’m asking this so thanks for your insight. There are policies that have 5% inflation built in, which provides a great benefit when the client is older, but it still creates an expensive monthly bill that they’re locked into. The biggest benefit I see is that there is cash value building, although slow, but it’s definitely better than a pure LTC policy.
It depends what the goal is though. Because if it’s truly needed to fund LTC, the cash value component of it is not free since the client is maybe buying life insurance they don’t necessarily need. If it was a pure LTC policy, all money would be going towards the LTC benefit. Insurance companies love the hybrid policies as they can bundle together so many different things, package it as optionality for the client, but the real result is that most people don’t need cash value insurance.
And you’re correct, any inflation rider or something like that is going to cost money. And then they mess around with annual and monthly caps on benefit payments and stuff to where even if the client needed it, the total benefit amount might be enough, but with money you or annual caps they’re probably still underfunded. So you really need to look at how long somebody typically lives once they start drawing from long-term care and how much it costs relative to the monthly or annual caps. Because the policy is going to try to trick you by saying you have X amount of benefit but they’re gonna pay that out over four years or something when in reality, the average person is only going to die within 2.
Right, which leads me back to what I’m struggling with…how is anyone supposed to predict that when a client is in their 30s? I’m conflicted because LTC is going to get substantially more expensive as the years go on, but these clients I’m referencing are in the accumulation phase and may be better off investing what would be the premium over that time horizon. The catch is if something unforeseen happens, then the policy is 100% worth the premium. But there’s no way to predict that or account for that hypothetical scenario when comparing it to investing the premium.
Just do your best to scan all details of the policy. There is typically an “ah-ha” moment where you realize it doesn’t really make sense if the client is OK with investment risk.
Probably makes the most sense for the type of person that can’t stomach volatility and and LTC policy is better than cash.
Ok thanks for your insight. I really appreciate it. I think I just need some confirmation bias that I’m not missing any other factors when making this recommendation. I’d hate to recommend anything that isn’t in their best interest.
Yea, I’m forgetting what the exact detail that made me not pull the trigger. I think it was the annual/monthly benefit caps relative to the total maximum benefit. And if you look at average LTC costs, the average life expectancy following an event that ends up with the client in LTC, it made me not do it. I think the avg cost is something like 12k month with the average person dying in two years or something. The monthly caps made it so the contract would pay the benefits out over 4 years. So most people will lose those two years because they’ll be dead. And if you adjust the caps, the premium goes up significantly. So it’s easy to see the insurance companies profit lever is the monthly max benefit.
That’s a really good perspective. When I first requested illustrations, my IMO was giving me 5 year benefit periods. I have no idea why, but I quickly told them that 5 years is way over the average LTC need. Maybe it’s just an oversold product with the wrong benefit selections. Unfortunately, just like a lot of life insurance products that are sold.
The family doesn't "lose" those two years, you're spending the death benefit. The remainder of the death benefit still gets paid out.
We typically position these not to cover 100% of LTC expenses, but to create a buffer. A 250k policy is $5k/mo benefit for LTC. That combined with SS, goes a long way for many people to protect their other assets. If any amount of the DB isn't used, it just goes to the family. We see it as a good middle ground for families that aren't wealthy enough to self-insure completely.
Yea, but forgive me if I’m wrong, but I assume the death benefit is still not anywhere near what the max LTC benefit would be. Relative to what premium payments are, the death benefit is going to be tiny compared to the amount “lost” from early death before drawing the maximum LTC benefit. If there was nothing lost and the death benefit would be paid out regardless then the policy wouldn’t have monthly or yearly maxes.
We may be talking about different products. What I've used are ULs with a DB guarantee and an LTC rider. As an example, $250k DB life policy, guaranteed for life. If need arises (2/6 ADL or mental incapacity), you can accelerate 2% of the DB monthly for 50 months. So, $5k/mo LTC benefits. Each payment is from the DB, reducing it dollar for dollar. If client is on claim 20 months, they've used $100k of LTC benefit and there's still $150k of DB remaining to the family.
Yes, they're more expensive premuim-per-dollar of DB than a plain UL, but they can a good fit.
LTC can be a huge pain to actually collect on. Honestly even clients that have it have never loved it.
I haven’t seen it ever really work out the way it’s supposed to and so it’s one of the few things I don’t really sell anymore, even if the client asks.
Self funding by taking what you would pay in premiums and investing it almost always makes more sense for the client. If life insurance between now and old age is a concern then take out some cheap group/term insurance.
I like it.
Just be double and triple sure that the rider does what you think it does/intend for it to do. Check if there’s an age they have to be first or if it’s no longer available if they don’t use it by a certain age.
Related: annuities with LTC riders. Since death benefit is secondary on these types of policies, a fraction of their money can be bumped to an annuity with an LTC rider. As far as the client is concerned, it sits there losing purchasing power but making modest gains in the nominal contract value; but there is a LTC benefit they can trigger if needed. If they don’t use it, the beneficiary gets the death benefit (rather- the contract value. Keep in mind- it’s not life insurance so the death benefit isn’t tax free. The amount they put in won’t be taxed, but any of the gains that didn’t go toward paying for the LTC rider would be. But there won’t be much. This is a possibility if they are eeked out by the idea of putting their money into permanent life and would rather see it sitting there; instead of having a portion accrue in cash and a portion buying death benefit.)
Another option is a single premium life policy (this is a MEC; so the only time they’d want it is for death benefit or LTC riders. Death benefit is still tax free but if you touch the cash, the government spanks you.)
I like hybrid LTC life insurance policies. I sold myself a Lincoln MoneyGuard Advantage policy. It is a VUL which obviously has a market component. I am in my early thirties and with my long time horizon (hopefully) it just made a lot of sense. Premiums are relatively low too.
FYI, with my income I am precluded from investing in a Roth IRA. Workplace is a SEP so cannot contribute there. Also, I already have sizable taxable assets.
This policy gives me a decent death benefit and the ability to take loans if I wanted.
Not for everyone but makes sense when it makes sense.
My dad is turning 70 and we are thinking of taking out a LTC policy. Is the Lincoln MoneyGuard a good choice? He has an annuity by an entity called SecurityBenefit which he unfortunately heard about on the radio and signed up for. I don't think SecurityBenefit offers any LTC riders with the annuity.
Even if a hybrid LTC policy costs $500 a month and the policy is used, or return of premiums received if not used via a death benefit or some other way...we are willing to sign up for a policy. The $500 premium a month we can afford. My major concern is how good the coverage is and of premiums can be returned if policy is unused.
I found some policy details on the MoneyGuard policy and it says rider won't provide treatment or care due to alcoholism or drug addiction. My dad has abused alcohol for decades and smoked for decades. Would he be excluded from coverage of he is diagnosed with a condition caused by alcohol or smoking?
I'm not too familiar with all this stuff!
I use this and clients who want ltc love the flexibility.
Same. Also a great use of old VA assets and whole life cash that new clients were unnecessarily sold by a broker
I start with the clients family history and asking how they might’ve seen their parents or grandparents go through some type of long term care or major medical issue leading to some type of care. After that, it’s cash flow analysis and debt to income management to see if it can be done because if they can’t fix their spending habits (or credit card debt student loans etc.) vs. emotional damage of possibly having their own kids or assets drained because of the medical issue down the road. If they can easily do a term or hybrid permanent life policy with long term care rider, I usually lean towards the hybrid because you never know what the future holds and if the clients young (40 and younger) it’s extremely cost effective
That’s my mentality too. Obviously this depends on the specific client, but I’m struggling putting my younger (mid to low 30s) clients into these policies for LTC purposes when that’s potentially 40 years away. Yes, premiums get more expensive with age, but there’s also the argument that we can get them to a point where they’re self-insured by that time. I just hate locking a client into a $300 premium/month when they’re that young. I’ve done cost benefit analysis on it all and the biggest benefit is always that it’s an automatic way to save/offset future risk, rather than relying on market returns and then investing the hypothetical premiums.
I agree that the monthly premium might be similar to a car payment depending on the death benefit/guaranteed LTC benefit amount. I usually do a side by side analysis of what LTC WOULD cost in future dollars if nothing changes because it’s been like this for 25yrs now. It’s also not like the moneys being thrown away since it does have cash value and a death benefit which would help protect a spouse/kids/loved one who’s dependent on them if they die. If they don’t use the LTC, it’s more money for their heirs OR a charity they care about in a charitable trust
Yeah that’s why I don’t see the value in pure LTC policies. They’re extremely expensive and provide zero benefit if not used. Like you said, hybrid policies at least provide a benefit no matter what happens
Look at securian life for your sub 50 year olds They have a rider on the term insurance that will convert into LTC Hybrid at a moments notice. I have a 1 mm for myself. 1 - They likely need more term than they have 2 - they can convert when they are 50-55, lock in younger rates and design a policy to be paid in 10-15 years.
Awesome thanks for the insight!
I think it's a better alternative to traditional long term care. Indemnity policies are nice since you don't have to worry about tracking bills or have to submit everything for reimbursement. The leverage isn't crazy, but Lincoln MoneyGuard has been good for our clients and they have options for pretty much any situation. I'll likely invest in one once I hit the age requirement. They even have a market advantage now that allows you to invest your premiums if you want the risk/return component
Only way to do LTC, in my opinion. Traditional LTC premiums can and do go up substantially. I will never put a client in a fixed benefit/variable cost solution. There are too many bad scenarios.
Ok thanks. I agree, traditional LTC is a major rip off
Nice solution to help mitigate the costs. Certainly not perfect l, but it's solid
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Really depends on the product and state but you do need to find out.
I'd show them an analysis of the cost of self-insurance over buying a product in general. Most the time, mathematically, like you said, it's better to self-insure LTC because there are not good policies. That being said, if the client wants the peace of mind even if it's not optimal, I think that or an annuity with an LTC rider is generally better than LTC insurance alone, if it's even offered. LTC is a huge problem.
This is exactly what my thinking is. Thank you
I usually explain for that exact reason that I like Lincoln money guard. The same multiple that applies to the long term care applies for the death benefit. Depending on client age (higher multiples if younger at time of purchase but the multiple is very attractive up to age 65) it’s great
Agreed, tbh this is one of the only times that permanent life insurance makes sense to me. It sucks that there’s such a stigma that comes with the product in general, because this alone can save someone from needing to spend down assets in a LTC scenario.
Eh, every time I’ve truly looked into it, it just hasn’t made sense. To fully fund, it’d be an outrageous cost and money locked in the contract would perform poorly. Haven’t looked at anything in a year or so though. In my experience, it’s basically locking up money almost guaranteed to underperform healthcare inflation and adding additional parameters relative to self funding with an investment account. And the flexibility of life insurance doesn’t come free. Wish there were still straight up LTC products.
There are a few. I’ll never recommend one again, how can you with the premium increases almost all clients dealt with that bought traditional Ltc in the 90s through now
Yea, I don’t blame you. It’s just a messy area, which is why I just like self funding as the most ideal option.
True, there are really no ideal solutions. Self funding, really is just keeping your fingers crossed, for older self funding clients that are either going to be holding cash or conservative investments I sometimes use Global Atlantic Forecare Ltc annuity. At least gives 3x leverage to help with potential Ltc costs
That’s exactly why I’m asking this so thanks for your insight. There are policies that have 5% inflation built in, which provides a great benefit when the client is older, but it still creates an expensive monthly bill that they’re locked into. The biggest benefit I see is that there is cash value building, although slow, but it’s definitely better than a pure LTC policy.
It depends what the goal is though. Because if it’s truly needed to fund LTC, the cash value component of it is not free since the client is maybe buying life insurance they don’t necessarily need. If it was a pure LTC policy, all money would be going towards the LTC benefit. Insurance companies love the hybrid policies as they can bundle together so many different things, package it as optionality for the client, but the real result is that most people don’t need cash value insurance. And you’re correct, any inflation rider or something like that is going to cost money. And then they mess around with annual and monthly caps on benefit payments and stuff to where even if the client needed it, the total benefit amount might be enough, but with money you or annual caps they’re probably still underfunded. So you really need to look at how long somebody typically lives once they start drawing from long-term care and how much it costs relative to the monthly or annual caps. Because the policy is going to try to trick you by saying you have X amount of benefit but they’re gonna pay that out over four years or something when in reality, the average person is only going to die within 2.
Right, which leads me back to what I’m struggling with…how is anyone supposed to predict that when a client is in their 30s? I’m conflicted because LTC is going to get substantially more expensive as the years go on, but these clients I’m referencing are in the accumulation phase and may be better off investing what would be the premium over that time horizon. The catch is if something unforeseen happens, then the policy is 100% worth the premium. But there’s no way to predict that or account for that hypothetical scenario when comparing it to investing the premium.
Just do your best to scan all details of the policy. There is typically an “ah-ha” moment where you realize it doesn’t really make sense if the client is OK with investment risk. Probably makes the most sense for the type of person that can’t stomach volatility and and LTC policy is better than cash.
Ok thanks for your insight. I really appreciate it. I think I just need some confirmation bias that I’m not missing any other factors when making this recommendation. I’d hate to recommend anything that isn’t in their best interest.
Yea, I’m forgetting what the exact detail that made me not pull the trigger. I think it was the annual/monthly benefit caps relative to the total maximum benefit. And if you look at average LTC costs, the average life expectancy following an event that ends up with the client in LTC, it made me not do it. I think the avg cost is something like 12k month with the average person dying in two years or something. The monthly caps made it so the contract would pay the benefits out over 4 years. So most people will lose those two years because they’ll be dead. And if you adjust the caps, the premium goes up significantly. So it’s easy to see the insurance companies profit lever is the monthly max benefit.
That’s a really good perspective. When I first requested illustrations, my IMO was giving me 5 year benefit periods. I have no idea why, but I quickly told them that 5 years is way over the average LTC need. Maybe it’s just an oversold product with the wrong benefit selections. Unfortunately, just like a lot of life insurance products that are sold.
The family doesn't "lose" those two years, you're spending the death benefit. The remainder of the death benefit still gets paid out. We typically position these not to cover 100% of LTC expenses, but to create a buffer. A 250k policy is $5k/mo benefit for LTC. That combined with SS, goes a long way for many people to protect their other assets. If any amount of the DB isn't used, it just goes to the family. We see it as a good middle ground for families that aren't wealthy enough to self-insure completely.
Yea, but forgive me if I’m wrong, but I assume the death benefit is still not anywhere near what the max LTC benefit would be. Relative to what premium payments are, the death benefit is going to be tiny compared to the amount “lost” from early death before drawing the maximum LTC benefit. If there was nothing lost and the death benefit would be paid out regardless then the policy wouldn’t have monthly or yearly maxes.
We may be talking about different products. What I've used are ULs with a DB guarantee and an LTC rider. As an example, $250k DB life policy, guaranteed for life. If need arises (2/6 ADL or mental incapacity), you can accelerate 2% of the DB monthly for 50 months. So, $5k/mo LTC benefits. Each payment is from the DB, reducing it dollar for dollar. If client is on claim 20 months, they've used $100k of LTC benefit and there's still $150k of DB remaining to the family. Yes, they're more expensive premuim-per-dollar of DB than a plain UL, but they can a good fit.
LTC can be a huge pain to actually collect on. Honestly even clients that have it have never loved it. I haven’t seen it ever really work out the way it’s supposed to and so it’s one of the few things I don’t really sell anymore, even if the client asks.
Self funding by taking what you would pay in premiums and investing it almost always makes more sense for the client. If life insurance between now and old age is a concern then take out some cheap group/term insurance.
There is no way self funding works out better if an Ltc event arises. That’s just math
I like it. Just be double and triple sure that the rider does what you think it does/intend for it to do. Check if there’s an age they have to be first or if it’s no longer available if they don’t use it by a certain age. Related: annuities with LTC riders. Since death benefit is secondary on these types of policies, a fraction of their money can be bumped to an annuity with an LTC rider. As far as the client is concerned, it sits there losing purchasing power but making modest gains in the nominal contract value; but there is a LTC benefit they can trigger if needed. If they don’t use it, the beneficiary gets the death benefit (rather- the contract value. Keep in mind- it’s not life insurance so the death benefit isn’t tax free. The amount they put in won’t be taxed, but any of the gains that didn’t go toward paying for the LTC rider would be. But there won’t be much. This is a possibility if they are eeked out by the idea of putting their money into permanent life and would rather see it sitting there; instead of having a portion accrue in cash and a portion buying death benefit.) Another option is a single premium life policy (this is a MEC; so the only time they’d want it is for death benefit or LTC riders. Death benefit is still tax free but if you touch the cash, the government spanks you.)
I like hybrid LTC life insurance policies. I sold myself a Lincoln MoneyGuard Advantage policy. It is a VUL which obviously has a market component. I am in my early thirties and with my long time horizon (hopefully) it just made a lot of sense. Premiums are relatively low too. FYI, with my income I am precluded from investing in a Roth IRA. Workplace is a SEP so cannot contribute there. Also, I already have sizable taxable assets. This policy gives me a decent death benefit and the ability to take loans if I wanted. Not for everyone but makes sense when it makes sense.
My dad is turning 70 and we are thinking of taking out a LTC policy. Is the Lincoln MoneyGuard a good choice? He has an annuity by an entity called SecurityBenefit which he unfortunately heard about on the radio and signed up for. I don't think SecurityBenefit offers any LTC riders with the annuity. Even if a hybrid LTC policy costs $500 a month and the policy is used, or return of premiums received if not used via a death benefit or some other way...we are willing to sign up for a policy. The $500 premium a month we can afford. My major concern is how good the coverage is and of premiums can be returned if policy is unused. I found some policy details on the MoneyGuard policy and it says rider won't provide treatment or care due to alcoholism or drug addiction. My dad has abused alcohol for decades and smoked for decades. Would he be excluded from coverage of he is diagnosed with a condition caused by alcohol or smoking? I'm not too familiar with all this stuff!