Changing Client Solutions for a Changing LTC World 1 Hour

LTC Planning – Your Client Can’t ignore It Living longer = likely increased need for care Cost of long-term care is increasing  poses a significant risk to retirement portfolio LTC Insurance pays for full range of long-term care services clients may need Advisors should present spectrum of options – Self insure vs. Traditional LTCI vs. Linked Benefit

Will it happen to your client? It may not, however…… % of people who reach age 65 will need long- term care at some point in their lives (due to cognitive impairment or deficiency in 2 activities of daily living)* 40% of people receiving long-term care in the U.S. are between the ages 18 and 64** So ask a simple question…… * U.S. Dept. of HHS **AALTCI

In Short… What has changed…? The Market & Products! What has NOT changed…? The NEED!

MARKET CHANGES Traditional LTCI

Traditional LTCI Marketplace Carriers have:  raised premiums  exited the market Consumer affordability concerns – now and during retirement years Consumers inability to qualify Consumers looking for guarantees “Use it or lose it” concerns Marginal LTCI market penetration WHY?

CAUTION! The Traditional market changes do NOT mean the Traditional LTCI market is no longer viable

“Linked Benefit” Marketplace – The Evolution What do we mean by “linked benefits”  Life products (or annuities) with LTC riders  Single premium vs. ongoing premium The first wave vs. the next wave  Life with “acceleration” riders LTC vs. Chronic Illness riders Reimbursement vs. Indemnity benefits

LINKED BENEFIT POLICIES Okay…so how do they work…?

Asset-based Reimbursement Requires a single initial premium deposit  may be 1035 exchange  Multi-pay MAY be available Leverages the premium deposit into a much larger pool of dollars for LTC expenses Death benefit reduced dollar-for-dollar for each LTC dollar that is reimbursed Money-back guarantee may be available

Linked Benefits continued Ongoing premium plans  Accelerates the death benefit for “LTC” (or “Chronic Illness”) – max paid is face amount  Favors Life insurance first, with LTC rider  Usually a Universal Life product  Reimbursement, indemnity or cash  Some carriers charge an extra premium, others “discount” the death benefit  Slowing vs. not slowing cash value growth

LTC/Chronic Illness Acceleration Riders Limits on benefit access  1%, 2% or 4% monthly vs. annual max  IRS “per diem” How is death benefit reduced?  Dollar for dollar vs. “discounted” death benefit  Since no charge up front, must account for time value of early payout  Greater than dollar for dollar reduction

Linked Product Target Audience Retirees (or near retirement) with invested assets and have chosen to self-insure the risk of needing long-term care Concerned about paying premiums – and never using benefits Worried about premium increases Value control of assets Can’t see themselves as needing care Already said no to LTCI

So…Which One is “Best?” It depends!

Pros & Cons - LTCI Most comprehensive benefits Availability of tax incentives Partnership asset protection availability Susceptible to rate changes Can I GET it?

Pros & Cons - Linked Reduces worries re: “use it or lose it” Reduces worries re: premium increases Easier to qualify? Third party ownership potential Ability to change to “short pay” post-issue No/limited tax incentives on premiums  BUT remember income tax free death benefit Difference between “Long Term Care” and “Chronic Illness”

What Are Questions to Consider? Have you already decided against LTCI? Can you qualify for LTCI? Do you feel an LTC event could happen? Do you prefer to “self-insure” the LTC risk? CAN you self-insure the risk? Are you worried about LTCI rate increases? How old are you now? Do you own a business?

Conclusion There is NOT one “best” solution! Ask your prospects the right questions The ultimate question:  “What’s the Alternative?”

THANK YOU! Questions?