The Best Asset-Based LTC Policy IMOs Don’t Know About

By: Roccy DeFrancesco, JD, CAPP, CMP
roccy@wealthpreservationinstitute.com

To sign up for info on the product discussed in this newsletter, click on the following link:

https://advisorshare.com/best-ab-ltc-imos-dont-use

It’s amazing how many IMOs are NOT familiar with the Asset-Based LTC (Long-Term Care) product discussed below.

19-Page Asset-Based White Paper

What is an Asset-Based LTC (AB-LTC) policy?

Most advisors are NOT familiar with AB-LTC products. If you are not familiar and want to learn more, click on the following link:

https://advisorshare.com/ab-ltc-white-paper

Considering that 69% of Americans age 65 and older will need some form of LTC and that the average cost of a private room in a nursing home facility costs $100,000 a year ($50,000 for assisted living), you’d think more advisors would want to learn about these products.

For those who are NOT familiar with these products, here is quick summary:

1. It’s a life insurance policy designed with “living benefits.”
2. Living benefits = paying LTC benefits to insureds while they are still alive.
3. Benefits come in the form of a tax-free advancement of the death benefit.
4. Living benefits are activated when an insured can’t perform “2 of 6 ADLs.”

ADL stands for Activities of Daily Living (Bathing, Eating without Help, Dressing, Toileting, Continence, and Transferring (mobility).

Three different AB-LTC policy designs

1. Designed for the maximum LTC benefit.
2. Designed for an unlimited LTC benefit.
3. Designed for an OK LTC benefit but with the highest cash surrender value and death benefit.

Lost opportunity cost—the downside to using most AB-LTC policies is that you lose the opportunity cost on the premium paid. If you pay a $100,000 premium, in 5, 10, 15, 20 years, you only get back $100,000 with a return of premium (ROP) product or less if no ROP option.  This is a deal killer for some clients because they don’t think they will need the care.

Increasing account value and death benefit

Product 3) from my above list is nearly an unknown product in the industry. Why? That’s a good question. I like it as an option as you’ll see in the following example.

Let’s take a 65-year old male and assume he has $100,000 he can allocate to an AB-LTC product (by the way, most products today can be purchased using an annual premium option vs. lump sum).

Let’s look at the difference in benefits of the three products.

What jumps out at you?

1. Product one has the best “guaranteed” benefit the first 72 months.
   
2. Product two is the only product with an unlimited benefit.
   
3. Product three has by far the highest death benefit and cash surrender value.

Things to think about:

• Most LTC claims last less than four years and death is the reason the claim stops.
• Many clients who have NO family history of a need for LTC will NOT like the low death benefit and CSV (cash surrender value) of products 1) and 2).
• Product 3 at least gets a modest return on premium and a sizable death benefit should the client NOT use the LTC benefit.

Advisor Compensation  (Last by intention)

Product 1 = 7.5%
Product 2 = 8.0%
Product 3 = 11.0%

Which product do you think clients will like better?

Different clients will gravitate to different products. But since 95% or more of the industry has never heard of product 3), they will never get that option (an option many will like because they don’t think they will need the product and buy it because of the higher death benefit and CSV).

The Best Asset-Based LTC Policy IMOs Don’t Know About

By: Roccy DeFrancesco, JD, CAPP, CMP
roccy@wealthpreservationinstitute.com

To sign up for info on the product discussed in this newsletter, click on the following link:

https://advisorshare.com/best-ab-ltc-imos-dont-use

It’s amazing how many IMOs are NOT familiar with the Asset-Based LTC (Long-Term Care) product discussed below.

19-Page Asset-Based White Paper

What is an Asset-Based LTC (AB-LTC) policy?

Most advisors are NOT familiar with AB-LTC products. If you are not familiar and want to learn more, click on the following link:

https://advisorshare.com/ab-ltc-white-paper

Considering that 69% of Americans age 65 and older will need some form of LTC and that the average cost of a private room in a nursing home facility costs $100,000 a year ($50,000 for assisted living), you’d think more advisors would want to learn about these products.

For those who are NOT familiar with these products, here is quick summary:

1. It’s a life insurance policy designed with “living benefits.”
2. Living benefits = paying LTC benefits to insureds while they are still alive.
3. Benefits come in the form of a tax-free advancement of the death benefit.
4. Living benefits are activated when an insured can’t perform “2 of 6 ADLs.”

ADL stands for Activities of Daily Living (Bathing, Eating without Help, Dressing, Toileting, Continence, and Transferring (mobility).

Three different AB-LTC policy designs

1. Designed for the maximum LTC benefit.
2. Designed for an unlimited LTC benefit.
3. Designed for an OK LTC benefit but with the highest cash surrender value and death benefit.

Lost opportunity cost—the downside to using most AB-LTC policies is that you lose the opportunity cost on the premium paid. If you pay a $100,000 premium, in 5, 10, 15, 20 years, you only get back $100,000 with a return of premium (ROP) product or less if no ROP option.  This is a deal killer for some clients because they don’t think they will need the care.

Increasing account value and death benefit

Product 3) from my above list is nearly an unknown product in the industry. Why? That’s a good question. I like it as an option as you’ll see in the following example.

Let’s take a 65-year old male and assume he has $100,000 he can allocate to an AB-LTC product (by the way, most products today can be purchased using an annual premium option vs. lump sum).

Let’s look at the difference in benefits of the three products.

What jumps out at you?

1. Product one has the best “guaranteed” benefit the first 72 months.
   
2. Product two is the only product with an unlimited benefit.
   
3. Product three has by far the highest death benefit and cash surrender value.

Things to think about:

• Most LTC claims last less than four years and death is the reason the claim stops.
• Many clients who have NO family history of a need for LTC will NOT like the low death benefit and CSV (cash surrender value) of products 1) and 2).
• Product 3 at least gets a modest return on premium and a sizable death benefit should the client NOT use the LTC benefit.

Advisor Compensation  (Last by intention)

Product 1 = 7.5%
Product 2 = 8.0%
Product 3 = 11.0%

Which product do you think clients will like better?

Different clients will gravitate to different products. But since 95% or more of the industry has never heard of product 3), they will never get that option (an option many will like because they don’t think they will need the product and buy it because of the higher death benefit and CSV).