ltc insurance sales concept of the month john hancock long-term care insurance a new age in ltc...

LTC Insurance Sales Concept of the Month John Hancock Long-Term Care Insurance

A New Age in LTC


A New Age in LTC

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 LTCA 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 AlternativesConsider 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 Perio

d - LT

Eliminatio

n Period – 0 Day

Inflatio

n Protection - C

mpd

LTCI Benefit

Amount

The access rate of benefits is critical.

A New Age in LTCA 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


• 5/5% Annual Compound Inflation Option

− LTCI Benefit & Policy Limit increased 5% compound, each year


• 5/3% Annual Compound Inflation Option (New!) *

− LTCI Benefit Amount increased 5% compound each year

− LTCI Policy Limit increased 3% compound each year


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


• 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


• 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%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 Option5/3% 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 #1Case 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


• 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:



− $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




• 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





Susan’s Policy Example:Lifetime, $100/day Benefits, $200 a day expenses, 5/5% Compounding Inflation, immediate LTC need

Susan’s Policy Example:Lifetime, $100/day Benefits, $200 a day expenses, 5/5% Compounding Inflation, immediate LTC need

Policy DailyActual $200 Paid by Out of

Age Year Benefit Expense Policy Pocket*

55 1 $100 $73,000 $36,500 $36,500

56 2 $105 $75,190 $38,325 $36,865

57 3 $110 $77,446 $40,150 $37,296

58 4 $116 $79,769 $42,340 $37,429

59 5 $122 $82,162 $44,530 $37,632

Totals $387,567 $201,845 $185,722


*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



− GPO Inflation


• ($250 is the benefit amount $100/day would compound to in year 29; age 79)


− Out of pocket costs after EP = 0

Susan’s Policy Example:Alternative ASusan’s Policy Example:Alternative A




− 5/3% Inflation



− Out of pocket cost after EP = 0



− 5/3% Inflation




Susan’s Policy Example:Alternative BSusan’s Policy Example:Alternative B



• 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



• The Lee’s representative recommends:



− $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 Lee’s representative recommends:



− $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




• 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




• 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





The Lee’s Policy Example:Lifetime, $130/day Benefits, $300 a day expenses, 5/5% Compounding Inflation, immediate LTC need

The Lee’s Policy Example:Lifetime, $130/day Benefits, $300 a day expenses, 5/5% Compounding Inflation, immediate LTC need

Policy DailyActual $300 Paid by Out of

Age Year Benefit Expense Policy Pocket*

49 1 $130 $109,500 $47,450 $62,050

50 2 $136 $112,785 $49,640 $63,145

Totals $222,285 $97,090 $125,195


* Does not include cost of Elimination Period



− GPO Inflation


− 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



− GPO Inflation



• $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 AThe Lee’s Policy Example:Alternative A




− 5/3% Inflation



− Since Sara’s claim was due to an accident, her Double Accident Benefit would have covered up to $640/ Day!


A New Age in LTC



− 5/3% Inflation



− Since Sara’s claim was due to an accident, her Double Accident Benefit would have covered up to $640/ Day!


A New Age in LTC

The Lee’s Policy Example:Alternative BThe Lee’s Policy Example:Alternative B


Enhanced GPO Inflation Example *GPO with 5/5% or 5/3% Conversion at 65Daily Benefits, 90 Day EP, 5 year BP

Enhanced GPO Inflation Example *GPO with 5/5% or 5/3% Conversion at 65Daily 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.

• 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.

Daily GPO 5/5% GPO 5/3%

Age Benefit Limit Limit

55 $100 $182,500 $182,500

56 $100 $182,500 $182,500

57 $100 $182,500 $182,500

58 $100 $182,500 $182,500

59 $100 $182,500 $182,500

60 $100 $182,500 $182,500

61 $100 $182,500 $182,500

62 $100 $182,500 $182,500

63 $100 $182,500 $182,500

64 $100 $182,500 $182,500

65 $100 $182,500 $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

Age 5/5%

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 10 Yr 10 Yr 10 Yr 10 Yr 10 Yr 10 Yr 10 Yr

1 55 150 547,500 195 711,750 205 748,250 370 1,350,500

5 59 183 667,950 237 801,081 246 897,900 370 1,350,500

10 64 234 854,100 302 928,672 297 1,084,963 370 1,350,500

15 69 299 1,091,350 386 1,076,586 349 1,272,025 370 1,350,500

20 73 382 1,394,300 491 1,248,058 400 1,459,088 370 1,350,500

25 79 487 1,777,550 627 1,446,841 451 1,646,150 370 1,350,500

90 Day Elimination Period, Daily Benefits



Policy

Year

Age 5/5%

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 5 Yr 5 Yr 5 Yr 5 Yr 5 Yr 5 Yr 5 Yr

1 55 190 346,750 250 456,250 270 492,750 460 839,500

5 59 232 423,400 305 513,513 324 591,300 460 839,500

10 64 296 540,200 390 595,303 392 714,488 460 839,500

15 69 378 689,850 500 690,119 459 837,675 460 839,500

20 73 483 881,475 638 800,037 527 960,863 460 839,500

25 79 616 1,124,200 815 927,462 594 1,084,450 460 839,500

90 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:Ask your clients:


A New Age in LTC


A New Age in LTC



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

ltc insurance sales concept of the month john hancock long-term care insurance a new age in ltc...

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