LTC Insurance Sales Concept of the Month John Hancock Long-Term Care Insurance A New Age in LTC Leveraging the Enhanced GPO and the 5/3% Compound Inflation Option Leveraging the Enhanced GPO and the 5/3% Compound Inflation Option LTC-VC2 02/04 For Agent Training Only. Not for Use With the Public. Long-Term Care Insurance is Underwritten by John Hancock Life Insurance Company Boston, MA 02117

A New Age in LTC Provides Flexibility Provides Choice Helps to eliminate cost variances in care delivery and setting Unused benefits remain in the pool for future use Provides Flexibility Provides Choice Helps to eliminate cost variances in care delivery and setting Unused benefits remain in the pool for future use

Consider Benefit Period Alternatives To traditional “Lifetime and Compound inflation combo” below age 65: − Consider the benefit amount − Maximize benefit access today as well as tomorrow − What is an appropriate benefit period? The average length of need for LTC stay is 2.6 years* Only 11.4% of John Hancock’s claims are expected to exceed a 6-year benefit* Industry- 9% expected to exceed 5 year benefit period To traditional “Lifetime and Compound inflation combo” below age 65: − Consider the benefit amount − Maximize benefit access today as well as tomorrow − What is an appropriate benefit period? The average length of need for LTC stay is 2.6 years* Only 11.4% of John Hancock’s claims are expected to exceed a 6-year benefit* Industry- 9% expected to exceed 5 year benefit period *John Hancock pricing assumptions, Statistical Analysis 2003

Benefit Period - LT Elimination Period – 0 Day Inflation Protection - Cmpd LTCI Benefit Amount The access rate of benefits is critical. A New Age in LTC

5/5% Annual Compound Inflation Option − LTCI Benefit & Policy Limit increased 5% compound, each year − Increases applied to the remaining policy limit, even if on claim 5/3% Annual Compound Inflation Option (New!) * − LTCI Benefit Amount increased 5% compound each year − LTCI Policy Limit increased 3% compound each year − Increases applied to the remaining policy limit, even if on claim 5/5% Annual Compound Inflation Option − LTCI Benefit & Policy Limit increased 5% compound, each year − Increases applied to the remaining policy limit, even if on claim 5/3% Annual Compound Inflation Option (New!) * − LTCI Benefit Amount increased 5% compound each year − LTCI Policy Limit increased 3% compound each year − Increases applied to the remaining policy limit, even if on claim Inflation options may be dropped after issue Custom Care II: Unique Inflation Protection * Please note that 5/3% Compound Inflation may accelerate the usage of a Benefit Period

Annual Simple Inflation Option − LTCI Benefit increased 5% of original benefit, each year − Increases applied to the remaining policy limit, even if on claim Enhanced GPO (New!) − Offer to increase benefits every three years by 5%,10% or 15% − One time offer to covert to 5/5% or 5/3% compound at age 65 Annual Simple Inflation Option − LTCI Benefit increased 5% of original benefit, each year − Increases applied to the remaining policy limit, even if on claim Enhanced GPO (New!) − Offer to increase benefits every three years by 5%,10% or 15% − One time offer to covert to 5/5% or 5/3% compound at age 65 Inflation options may be dropped after issue Custom Care II: Unique Inflation Protection

Leveraging GPO and 5/3% How do you maximize benefits while staying within the budget? − Younger clients have other financial concerns College savings Retirement savings Mortgage payments How do you maximize benefits while staying within the budget? − Younger clients have other financial concerns College savings Retirement savings Mortgage payments

5/3 % Annual Compound Inflation Option Provides a premium saving alternative to traditional compound inflation Use the premium difference between 5/5% and 5/3% savings to purchase additional daily or monthly benefits Provides a premium saving alternative to traditional compound inflation Use the premium difference between 5/5% and 5/3% savings to purchase additional daily or monthly benefits

Case Study #1 Susan Jones is age 55, homeowner, widowed with teenage children (with educational expenses) Susan’s budget for LTC is $1750 to $2500 for insurance She has two personal family experiences with LTC (2 and 4 years) Local costs in Susan’s area average $125/Day for Nursing Home Care Susan Jones is age 55, homeowner, widowed with teenage children (with educational expenses) Susan’s budget for LTC is $1750 to $2500 for insurance She has two personal family experiences with LTC (2 and 4 years) Local costs in Susan’s area average $125/Day for Nursing Home Care Hypothetical example

Case Study #1 Susan’s representative recommends: − Lifetime Benefits − Compound Inflation − $100/Day Her representative informs her that the compounding effect will take care of any inadequacies in the first years due to an anticipated slowing in inflation The premium for the policy is $2,622 per year Susan’s representative recommends: − Lifetime Benefits − Compound Inflation − $100/Day Her representative informs her that the compounding effect will take care of any inadequacies in the first years due to an anticipated slowing in inflation The premium for the policy is $2,622 per year Hypothetical example

Case Study #1 Later in the year, Susan has a stroke resulting with benefit eligibility Unfortunately, her care is above average and costs nearly $200 per day − Her and her family wanted the care received in the home − Care costs inflate each year at 3% Care lasts for 5 years Lets look at her situation and how the policy paid: Later in the year, Susan has a stroke resulting with benefit eligibility Unfortunately, her care is above average and costs nearly $200 per day − Her and her family wanted the care received in the home − Care costs inflate each year at 3% Care lasts for 5 years Lets look at her situation and how the policy paid: Hypothetical example

Susan’s Policy Example: Lifetime, $100/day Benefits, $200 a day expenses, 5/5% Compounding Inflation, immediate LTC need PolicyDailyActual $200Paid byOut of AgeYearBenefitExpensePolicyPocket* 551$100$73,000$36, $105$75,190$38,325$36, $110$77,446$40,150$37, $116$79,769$42,340$37, $122$82,162$44,530$37,632 Totals$387,567$201,845$185,722 Hypothetical example *Does not include cost of Elimination Period

Another recommendation the representative could make: − 5 Year Benefit Period − GPO Inflation − With “inflation pre-purchasing” of $320 / Day Benefit ($250 is the benefit amount $100/day would compound to in year 29; age 79) − Similar Annual Premium $2,616 − Out of pocket costs after EP = 0 Another recommendation the representative could make: − 5 Year Benefit Period − GPO Inflation − With “inflation pre-purchasing” of $320 / Day Benefit ($250 is the benefit amount $100/day would compound to in year 29; age 79) − Similar Annual Premium $2,616 − Out of pocket costs after EP = 0 Susan’s Policy Example: Alternative A Hypothetical example

Another recommendation the representative could make: − 5 Year Benefit Period − 5/3% Inflation − With “inflation pre-purchasing” of $210 / Day Benefit − Similar Annual Premium $2,547 − Out of pocket cost after EP = 0 Another recommendation the representative could make: − 5 Year Benefit Period − 5/3% Inflation − With “inflation pre-purchasing” of $210 / Day Benefit − Similar Annual Premium $2,547 − Out of pocket cost after EP = 0 Susan’s Policy Example: Alternative B Hypothetical example

Case Study #2 John and Sara Lee are ages 51 and 49 respectively, they have 2 children in college, and are trying to save towards retirement There budget for LTC is $2,500 - $3,500 for insurance Sara’s grandmother spent approximately 2 years in a Nursing Home after living with her parents for a year receiving home care. Local costs in the area average $130/Day for Nursing Home Care John and Sara Lee are ages 51 and 49 respectively, they have 2 children in college, and are trying to save towards retirement There budget for LTC is $2,500 - $3,500 for insurance Sara’s grandmother spent approximately 2 years in a Nursing Home after living with her parents for a year receiving home care. Local costs in the area average $130/Day for Nursing Home Care Hypothetical example

Case Study #2 The Lee’s representative recommends: − Lifetime Benefits − Compound Inflation − $130/Day Their representative informs them that the compounding effect will take care of any inadequacies in the first years due to an anticipated slowing in inflation The premium for the policy is $3,651 per year The Lee’s representative recommends: − Lifetime Benefits − Compound Inflation − $130/Day Their representative informs them that the compounding effect will take care of any inadequacies in the first years due to an anticipated slowing in inflation The premium for the policy is $3,651 per year Hypothetical example

Case Study #2 Later in the year, Sara has an accident resulting in benefit eligibility Unfortunately, her care is above average and costs nearly $300 per day due to extensive physical therapy that she chooses to receive at home − Care costs inflate each year at 3% Care lasts for 2 years Lets look at her situation and how the policy paid: Later in the year, Sara has an accident resulting in benefit eligibility Unfortunately, her care is above average and costs nearly $300 per day due to extensive physical therapy that she chooses to receive at home − Care costs inflate each year at 3% Care lasts for 2 years Lets look at her situation and how the policy paid: Hypothetical example

The Lee’s Policy Example: Lifetime, $130/day Benefits, $300 a day expenses, 5/5% Compounding Inflation, immediate LTC need PolicyDailyActual $300Paid byOut of AgeYearBenefitExpensePolicyPocket* 491$130$109,500$47,450$62, $136$112,785$49,640$63,145 Totals$222,285$97,090$125,195 Hypothetical example * Does not include cost of Elimination Period

Another recommendation the representative could make: − 6 Year Benefit Period − GPO Inflation − With “inflation pre-purchasing” of $350 / Day Benefit − Lower Annual Premium $2,546 $1,105 annual premium savings could be put towards conversion option at 65 when college expenses are paid − Since Sara’s claim was due to an accident and occurred prior to age 65, her Double Accident Benefit would have provided up to $700/ Day of benefit access! − Out of Pocket Cost after EP = 0 A New Age in LTC Another recommendation the representative could make: − 6 Year Benefit Period − GPO Inflation − With “inflation pre-purchasing” of $350 / Day Benefit − Lower Annual Premium $2,546 $1,105 annual premium savings could be put towards conversion option at 65 when college expenses are paid − Since Sara’s claim was due to an accident and occurred prior to age 65, her Double Accident Benefit would have provided up to $700/ Day of benefit access! − Out of Pocket Cost after EP = 0 A New Age in LTC The Lee’s Policy Example: Alternative A Hypothetical example

Another recommendation the representative could make: − 4 Year Benefit Period − 5/3% Inflation − With “inflation pre-purchasing” of $320 / Day Benefit − Lower Annual Premium $2,685 − Since Sara’s claim was due to an accident, her Double Accident Benefit would have covered up to $640/ Day! − Out of pocket cost after EP = 0 A New Age in LTC Another recommendation the representative could make: − 4 Year Benefit Period − 5/3% Inflation − With “inflation pre-purchasing” of $320 / Day Benefit − Lower Annual Premium $2,685 − Since Sara’s claim was due to an accident, her Double Accident Benefit would have covered up to $640/ Day! − Out of pocket cost after EP = 0 A New Age in LTC The Lee’s Policy Example: Alternative B Hypothetical example

Enhanced GPO Inflation Example * GPO with 5/5% or 5/3% Conversion at 65 Daily Benefits, 90 Day EP, 5 year BP Policyholder, age 55 with college expenses wishes to limit premiums in early policy years Can’t afford compound 5/5% at $1,522 Selects GPO for savings and flexibility of conversion Premium for GPO $649 to age 65 Then goes to $1,730 at 65 with conversion to 5/5% compound Waiting and Purchasing a 5/5% policy at age 65 would have cost $2,379 In effect, the policy holder received coverage for 10 years and received a $649 credit for purchasing young Conversion premium is less than attained age purchase price. DailyGPO 5/5%GPO 5/3% AgeBenefitLimit 55$100$182,500 56$100$182,500 57$100$182,500 58$100$182,500 59$100$182,500 60$100$182,500 61$100$182,500 62$100$182,500 63$100$182,500 64$100$182,500 65$100$182,500 66$105$191,625$187,975 67$110$200,750$193,614 68$116$211,700$199,422 Does not elect any GPO offers prior to age 65. GPO Conversion to compound inflation at age 65

Maximize Access: Is the effect of inflation covered? Fixed Premium ($3,000) Variable Daily Benefit: 10 Year 5/5% Inflation vs. 5/3%, 5% Simple and GPO w/out conversion Policy Year Age5/5% Cmpd Daily 5/5% Cmpd Pool 5/3% Cmpd Daily 5/3% Cmpd Pool $ 5% Simple Daily 5% Simple Pool GPO w/out Conv. GPO w/out Conv. 10 Yr , , , ,350, , , , ,350, , , ,084, ,350, ,091, ,076, ,272, ,350, ,394, ,248, ,459, ,350, ,777, ,446, ,646, ,350, Day Elimination Period, Daily Benefits

Maximize Access: Is the effect of inflation covered? Fixed Premium ($3,000) Variable Daily Benefit: 5 Year 5/5% Inflation vs. 5/3%, 5% Simple and GPO w/out conversion Policy Year Age5/5% Cmpd Daily 5/5% Cmpd Pool 5/3% Cmpd Daily 5/3% Cmpd Pool $ 5% Simple Daily 5% Simple Pool GPO w/out Conv. GPO w/out Conv. 5 Yr , , , , , , , , , , , , , , , , , , , , ,124, , ,084, , Day Elimination Period, Daily Benefits

If something happened to you tonight how would your family pay for LTC? (Most will say with current income or assets) At a rate of $250/day; how long could you pay out of income and assets before it impacts your current standard of living? Health Insurance pays your medical bills Disability Insurance replaces your income Homeowners protects your home But none of these are designed to cover extensive LTC expenses If something happened to you tonight how would your family pay for LTC? (Most will say with current income or assets) At a rate of $250/day; how long could you pay out of income and assets before it impacts your current standard of living? Health Insurance pays your medical bills Disability Insurance replaces your income Homeowners protects your home But none of these are designed to cover extensive LTC expenses Ask your clients:

LTC Insurance Sales Concept of the Month John Hancock Long-Term Care Insurance A New Age in LTC Leveraging the Enhanced GPO and the 5/3% Compound Inflation Option Leveraging the Enhanced GPO and the 5/3% Compound Inflation Option For Agent Training Only. Not for Use With the Public. Long-Term Care Insurance is Underwritten by John Hancock Life Insurance Company Boston, MA 02117