By: Mark D. Milbrod, CLU
November, 2018 ASG Insight

November is Long Term Care Awareness Month and just like changing our smoke alarm batteries when we adjust for Daylight Savings Time, it’s probably a good time to take a good look at our own LTC planning.    What do you know and what don’t you know?  Just what is your LTC IQ?

As advisors, we talk to our clients about the need for proper planning every day.  But, do you have your LTC planning in place?  I worked for Prudential when I first started in the business.  The very first week, my Sales Manager had me apply for my own life insurance policy and once it was issued, I kept it in my briefcase at all times.  During my sales calls, I can say that I practiced what I preached. This created more  credibility behind the words that I spoke.  By going through the process, I sat in the shoes of my prospective clients and had a better feel for what they would be going through.

Today, when I meet with clients, I have the LTC conversation with just about everyone.   And yes, there is an LTC policy in my briefcase.  But unlike Life Insurance, the LTC process is a little different.  Have you gone through the process yourself?  If not then you should.  What better way to start the conversation with your existing or prospective clients.  Besides, as I stated earlier, when you practice what you preach, you tend to be a bit more passionate about the subject.

Today’s LTC marketplace is much different than it used to be.  Most of the stand alone products are gone with only a few carriers remaining. For the most part, the products are often very costly and have non-guaranteed premium structures.  There is also a forfeiture of the premiums paid if you never go on claim.

There are several other popular options that provide the most comprehensive types of LTC protection today.  Each variety includes a life insurance component that creates a multi purposed pool that can be used for pure life insurance, LTC benefits or a combination of both.  The first option is a life insurance policy (typically a GUL), with a Long Term Care Rider.  By utilizing this design, you take away the “use-it or lose-it” approach.   If you never go on claim with these options, the death benefit will be paid to a named beneficiary.  Some of these policies also have a unique feature not found in the stand alone options, an indemnity style benefit.  Indemnity benefits allow access to your LTC pool without having to submit receipts for care or having that care provided exclusively by skilled care workers.  This allows for greater flexibility and access to the entire pool of benefits.

Another option is the Hybrid/Blended Life plan designs.  These are often purchased as single premiums and provide a larger, leveraged pool of benefits.  These too, can be accessed as either an Indemnity or Reimbursement style of benefits.  In addition, a Return of Premium (ROP) feature is widely used with these options.  The ability to have a modest death benefit pool, a larger LTC pool and access to your premiums through that ROP option provides a smart parking space for money.  These funds would normally be ear marked as self-funded assets for a potential LTC event.

The last option worth mentioning is the potential of providing LTC benefits on an unlimited basis, regardless of how long a claim would last.  The first couple of options have a finite benefit pool that once exhausted, ceases to provide any additional payments.  Granted, the average length of an LTC claim is between three and four years so most of the previous options should be adequate.  However, for some cognitive illnesses such as Dementia and Alzheimer’s Disease, a patient can have a life expectancy between 8 -12 years from the time of diagnosis.   For this option, it is an interesting feature that can protect against those types of prolonged illnesses.   It should be noted that this particular option is available on an individual or joint life basis that can potentially provide life time benefits for two insureds.  Unfortunately, it is not available in all states, including New York.

So let’s take a quick LTC IQ Quiz:

  1. True or False? Stand alone LTC policy premiums are not guaranteed and can be increased several times during the life of the contract?
  2. True or False? Guaranteed Universal Life, Indexed Universal Life and Whole Life can have available LTC Riders that will guarantee premiums for the life of the contract?
  3. True or False? There is a rider available that will pay LTC benefits with an unlimited/uncapped pool?
  4. True or False? Indemnity based LTC Benefits can be used for informal/unskilled care and even be utilized to reimbursement a family member for wages lost as a result of providing that care?
  5. True or False? Older life insurance policies can be 1035 Exchanged into newer polices with LTC Riders or Hybrid/Blended Life platforms?

If you didn’t answer TRUE to all five questions or weren’t sure about the answer, call us to find out how to best utilize the products and services available through Agent Support Group.

There are so many different options available in today’s LTC marketplace.  It is definitely not what it used to be.  Unfortunately, most people that we know (ourselves included), can relate to these issues due to a personal experience or knowing someone that has been through it with a loved one.   The Baby Boomer generation has 10,000 people turning age 65 every day.  70% of this group will require some degree of long term care in their lifetime.   This makes this a grossly underserved market and one of the largest opportunities in our industry today.