Life With LTC: Right For Some Seniors

To see why, consider the environment in which the clients are living: Most seniors are holding extra assets in CDs, money markets and annuities. But, according to industry estimates, only 1% to 3% of all annuities are actually annuitized. Furthermore, many seniors dont really understand the limitations of the financial products they have already bought. (See Chart 1.)

In comparison to CDs, money markets and annuities, a single-pay integrated life/LTC insurance contract offers seniors important additional benefits.

Take the case of a 65-year-old female customer who is rated standard nonsmoker and who has $250,000 in extra funds. Assume she is in a 28% tax bracket. Should this woman purchase a CD, an annuity or the life policy mentioned earlier?

Here are the factors to consider: The woman doesnt need the income from the $250,000 for living expenses, and her goal is to maximize the amount that will go to her daughter at death. She envisions the $250,000 will pass to her daughter at death–unless she needs the money for some "emergency" such as to pay for LTC expenses. She says she doesnt want to purchase a stand-alone LTC policy because a) she does not want to pay for a benefit she may never receive; and b) she has the $250,000 to fund LTC herself if needed.

Lets assume the CD and annuity will annually return 3% and 4.25%, respectively. If the money goes into a life policy that pays LTC benefits, however, the $250,000 will buy a guaranteed death benefit of $425,168 with guaranteed LTC benefits of at least $8,502 per month for life.

When the facts are laid out like this, who would not buy the life insurance?

With many companies now providing integrated life/LTC product combinations along with easy-to-use comparison software among various financial vehicles, all the financial advisor needs to do is explain the real benefits of life insurance. The customers beneficiaries will thank you.

, CFA, CFP, CLU, ChFC, is vice president, sales and promotion at National Life Insurance Company, Montpelier, Vt., and a registered representative/ registered investment advisor with Equity Services Inc. His e-mail is: [email protected].

Reproduced from National Underwriter Edition, April 28, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.