Keep Your Cash - 1% Interest Rate AND Premium Increases^:

  • 60 Year Old Couple - Good "Standard/Non-Smoker" Health
  • $4,000/month starting LTC benefits for each
  • 3% compound automatic benefit inflation increases
  • ​Six-year maximum benefit period for each
    • (Traditional LTCI includes "shared benefits")
  • Hybrid insured death benefit of $104,000 each
  • Hybrid policy surrender cash value = $123,000
  • Single-premium "cost of money" & interest earned on the Keep Your Cash account = 1%*
    • ​Traditional LTC premiums paid out of the Keep Your Cash account​
  • T-LTCI premiums increase 10% year 6 and 30% year 11 (= 42% total increase)*
PLAN DESIGN:
HYBRID LIFE+LTC
"KEEP YOUR CASH"
​+ TRADITIONAL LTC
PREMIUMS:
- $175,000
(Liquid cash remaining = $0)
- $5,800 per year*
(Liquid cash year 1 = $171,000)
LIQUID CASH
​AT AGE 70:
$0
$122,000
LIQUID CASH
AT AGE 80:
$0
$55,000
TOTAL DEATH BENEFITS
​AT AGE 80:
$208,000
$55,000 (cash)
TOTAL PREMIUM COST
​BY AGE 80:
- $214,000
(NET DB = - $6,000)
 - $143,000*
(NET DB = + ​$55,000)
LTC BENEFITS PAID FOR 2-YEAR CLAIM ON EACH SPOUSE FROM AGES 80-82:
$352,000
$352,000
DEATH BENEFIT REMAINING IF BOTH HAVE A 2-YEAR LTC CLAIM:
$10,400
$56,000
(cash to heirs)
NET BENEFITS AFTER PREMIUM COSTS & 4-YEARS
​TOTAL LTC CLAIMS: 
$148,400
$265,000

Worst-case LTC claim: Wife has dementia & needs care for 8 years:

PLAN DESIGN:
HYBRID LIFE + LTC
"KEEP YOUR CASH"
+ TRADITIONAL LTC
LTC BENEFITS PAID FOR
WIFE'S 8-YEAR LTC CLAIM
STARTING AT AGE 80:
$561,000
(6-year maximum)
$771,000
​(Shared benefits)
NET BENEFITS​ AFTER PREMIUM
COSTS & 8-YEAR
DEMENTIA CLAIM:
$456,200
$688,000
* Hypothetical, for illustrative, comparative, educational purposes only.  All amounts rounded to nearest $100 or $1000.  T-LTCI premiums are designed and assumed to remain level, but are not guaranteed.  Hybrid LTC premiums and benefits are guaranteed.^

1% INTEREST & T-LTC RATE INCREASE ANALYSIS:

Plan for CARE!
​
Hybrid LTC still only "wins" if both spouses die with neither one needing long-term care, but, again, only barely once you consider the NET cost of the plan that does not even quite break-even.  With a Keep Your Cash + Traditional LTCI plan - even with minimal interest earnings AND premium increases four-times what is expected - the heirs are still not empty-handed, the remaining Keep Your Cash account is $55,000.

Traditional LTC "wins" again if either spouse needs care!  A short, two-year LTC claim for both spouses creates a dramatically more favorable financial outcome for the family even assuming only 1% interest/"cost of money" PLUS 42% in premiums increases over time!
For a worst-case, dementia LTC claim lasting 8 years, the Traditional LTC policy with "shared benefits" delivers more than $200,000 in additional LTC benefits to the family when they are needed most.

This is the best way to plan for CARE!
AGAIN: When you factor in the dramatic loss of cash liquidity for 20+ years, there is no reasonable justification to purchase a Hybrid LTC policy like this versus implementing a Keep Your Cash + Traditional LTC insurance plan - even IF you project higher than expected premium increases going forward.

LTC PLANNING NOTES:  
Again, during a Hybrid LTC claim the cash value is NOT available, therefore the only money available from the plan is the policy's LTC benefit.

And again, with the Traditional LTC policy, the liquid cash you keep - $55,000 at the start of a claim in this example - is available to use IN ADDITION TO the LTC insurance benefits for extra care costs, other out-of-pocket medical expenses or non-covered supplies, or for any other immediate needs along the way.  The liquidity advantage when you Keep Your Cash continues even once a LTC claim begins.

​Don't buy the hybrid hype.  Get the facts.  Keep Your Cash!
^ Examples are not reflective of any particular individual or specific company's policy and are for illustrative and general educational purposes only.  Not all options may be available in all states.  Contact us for more information and for a personalized illustration including disclosures and exclusions.
by Bill Comfort, CSA, CLTC, LTCCP
Published May 7, 2020