Long Term Care Insurance Solutions for Agents, Brokers, GA's & BGA's

Traditional vs. Combo LTCI

Problem

A broker had a client age 70 in average health that had been shown an annuity product with a long term care rider. The client was ready to deposit $200,000 that was going to earn 3.0% net interest (4% - 1% to pay for LTCI rider). The LTCI rider would provide $5,000 per month for 50 months (total pool $250,000). The other agent had explained “this is a great product; if you need LTCI you have coverage or if you need income off the annuity you can have that.

Our Solution:

We recommended the broker show the client the benefits of having a separate annuity PLUS a standalone Long Term Care Insurance policy.

• Place $200,000 in an annuity earning 4% interest; this generates $8,000 per year in interest.
• Buy a LTCI policy that had a benefit pool of $262,800 that could be accessed at a monthly rate of $5,475 for 48 months or at a rate of $5,000 for 52.5 months.
• Use $2,705 to pay for LTCI policy from the $8,000 interest.
• OR add a 5% simple increase rider and use only $3,979 of the $8,000 interest.

How Plan was implemented:

• Broker asked the client following questions:
  • Did the other agent explain that if you use the policy for Long Term Care you lose the value of the annuity?
  • Did he explain that if you use the annuity you lose your long term care coverage?
  • Did he explain that since you are required to use your money first (principle and interest) that you may never collect any of the LTCI benefits?
• Broker then explained the obvious benefits of having two separate policies that provided many more benefits. They then took 2 applications one for the annuity and one for the LTCi policy.

Result & Benefits Provided:

• Client can pay for LTCi by using only a portion of the interest off the annuity.
• If client needs LTC they get to keep their annuity and 100% of the interest as the waiver of premium pays for the LTCI. If they need income off the annuity they get to keep their LTCI.
• Broker did the right thing for their client AND got paid two commissions.