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LTCi News | HNW Solution

 

LTCi News – Who’s in?  Who’s out?

More changes in the LTCi marketplace . . .

Mass Mutual has re-entered the brokerage market with their new traditional LTCi plan [available in most states] and we have access to them!  They are priced competitively with Northwestern Mutual & New York Life.

Genworth suspended sales of traditional, individual long-term care insurance policies on March 11, 2019. Their statement was because insurance brokers are not proposing their product.  However, I would add the reason we are not selling their product is because company’s ratings and current financial situation.  Please watch out for your clients if they try purchasing direct.  There are certainly better places to be.

 

Are your HNW clients writing a blank check? 

I am aware of and agree with the consensus thinking that wealthy clients don’t need to buy long-term care insurance.  That doesn’t mean it isn’t a smart thing for them to do.  I learned this lesson over 10 years ago when an advisor and I were talking to a client about a second-to-die life insurance policy to provide estate liquidity.  During the planning process he asked his advisor and I about LTC insurance.  We failed to even bring up the topic thinking he had enough to self-insure.  His reasoning behind the purchase permanently altered my perspective.  Now I don’t assume, I ask.

Client Profile:

-Retired exec of major accounting firm

-Very astute regarding estate planning

-Given away his unified credit

-Gifted money to a family foundation

-Still retained a $20 Mill estate

LTCi Solution:

-Traditional LTCi policy on him & wife

-High monthly benefit

-Lifetime coverage

-$22,000 annual premium

-Paid up in 10 years

Why was he willing to spend more than $22,000 a year?

His reply . . . “I don’t know if I will need care.  I don’t know if my wife will need care.  If we need care, I don’t know how much it will cost, and I don’t know how long we will have to pay.  That sounds to me like writing a blank check and I am not in the habit of writing blank checks.  For a small amount that my family will forgo in a potential extra inheritance [from premium payments made on the policy], I don’t have the risk of writing blank checks, you do”.  Of course, he was referring to the insurance company’s obligation.

 

Should HNW Clients insure for long-term-care?

Since my “blank check” experience there has been an explosion of other options to secure LTC protection.  Many gravitate toward hybrid plans because they can guarantee a client gets their money back [via the death benefit] if they don’t need care and you can guarantee pricing.  Today you can add a rider for LTC to any type of permanent insurance policy you want.  Some HNW clients that can afford to pay for a known outcome prefer the life with rider solution vs a hybrid.  A life with rider design with a $1,000,000 death benefit assures that $1,000,000 will be paid as care, at death, or a combination of the two.  It is also paid income tax-free.

For a HNW married couple, we can use a trust to avoid the estate tax exposure on the death benefit.  A life insurance policy owned by a Spousal Lifetime Access Trust (SLAT) keeps the death benefit from being estate tax exposed while allowing access to the accelerated long-term care benefits if needed.  It is recommended to use an indemnity (vs reimbursement) product that is owner controlled.

Read our Integrated Insights™- Should High Net Worth Clients Insure for LTC? to learn more.

 

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