June 30, 2022. Many people assume the Lifetime Unlimited benefit period is no longer available with long term care insurance companies. Possibly your insurance agent or your financial advisor has told you that all underwriters stopped offering it many moons ago. Maybe you read something on the internet to this effect.
Well, it is true that most long-term care insurance policies today will only offer you a limited benefit period. In other words, the amount of total long term care insurance you purchase will have a stated capped policy limit.
For example, if you buy a long-term care insurance policy that provides you a $6000 monthly long term care benefit with a 5-year benefit period, the insurance company is providing you with a capped total benefit amount limit of $360,000. ($6000 month x 60 months = $360,000). The insurance company has no risk after it has paid out the $360,000 of benefits to you.
Most long-term care policies today are written in this fashion with benefit periods of 3 years, 4 years, or 5 years.
3 to 5 years of benefits?
Since when did long term care become short term care? Or medium-term care?
Well, approximately 12 years ago when the insurance companies ultimately realized you and I are living much longer.
And they no longer wanted to buy your long-tail risk of needing care.
So, many underwriters removed the Unlimited benefit period option in ~2012, or thereabouts. Along with this de-risking maneuver came the marketing messaging from the insurance companies.
"You really don't need Lifetime benefits."
"The Lifetime benefit period is over-insurance"
"Do you know that people only need care for 3 years on average."
Blah Blah Blah.
Of course, this messaging from the marketers and the wholesalers only became apparent and got louder once their companies took away your Lifetime benefit period option.
(Hey, if we can't sell it, you don't need it, right?)
Well, you might be surprised to know that the Unlimited Lifetime benefit period option does still exist today on a few long-term care insurance policies.
Not only does Lifetime LTC benefits exist, but it has also been selected by a high percentage of my clients over the years.
Why You Should Consider Lifetime Unlimited LTC Benefit Periods
Let's face it, life does not work in averages.
What is an average, anyway? Well, it is a measure of a central tendency. It is an arithmetic mean.
To arrive at an average, you add up all of the values in a data set and divide the sum of the values in the data set by the number of values.
When applied to long term care insurance claim data sets, the numbers will provide us with these averages.
- Women will need more long-term care than men will need, on average.
- Women will need 3.7 years of care on average.
- Men will need 2.2 years of care, on average.
In reviewing the actuarial studies, we are provided with the following data for claims.
|< 2 yrs||41%||52%||46%|
|2 - 4 yrs||25%||24%||24%|
|4 - 6 yrs||14%||12%||14%|
|> 6 yrs||20%||12%||16%|
So, while on average an LTC claim can last 3 years, you can see that some percentage of claims will be less than 3 years and some percentage of claims will be more.
Some advisors might like to claim you do not need LTC insurance beyond the average length of a care need. I always find this logic to plan around averages amusing.
Do you know the average fire insurance claim on a homeowner's policy in 2021 was $78,838? Would your advisor ever insist you reduce your fire insurance limit on your homeowner's policy to $78,838? Doubtful. And if so, would you even listen? Never.
If you are like most people, you probably view the purpose of having insurance is for the catastrophic events. It is the ability to transfer the protection of the risk over that we do not wish to retain ourselves. This is the peace of mind you are buying.
The limited benefit period policy will only work for you some of the time.
The Lifetime Unlimited benefit period policy will work for you all of the time.
There are many types of impairments where you can certainly expect to need long term care care for much longer than 3-4 years.
Fact: 20% of the time you will need care greater than 5 years.
If you are diagnosed with impairments such as Alzheimer's disease, dementia, or Parkinson's, you can expect to live 8 years on average, and possibly as long as 20 years post diagnosis.
The insurance companies are well aware of this risk, as well. A few years ago, in 2018 there was data published of the largest open claims by cost, male and female.
|Male||Total Cost||Female||Total Cost|
|1. 14 yrs, 2 mos.||$2,276,381||16 yrs, 6 mos.||$2,329,333|
|2. 19 yrs, 3 mos.||$2,205,800||15 yrs, 4 mos.||$2,636,417|
|3. 16 yrs, 2 mos.||$2,091,083||9 yrs, 10 mos.||$1,727,594|
|4. 15 yrs, 8 mos.||$1,700,000||14 yrs, 6 mos.||$2,000,000|
|5. 14 yrs, 3 mos.||$1,461,256||11 yrs, 7 mos.||$2,012,385|
|6. 15 yrs, 4 mos.||$1,413,934||15 yrs, 6 mos.||$1,499,601|
|7. 13 yrs, 2 mos.||$1,179,502||18 yrs, 1 mo.||$1,316,417|
To me what is most interesting in viewing these numbers is that with these 7 companies the open claims for the male are longer in duration than the female with 4 of the companies.
So, while women need more care than men "on average," certainly if you are male your gender will not guarantee you that your claim will be of short duration.
The Lifetime benefit period will be the only way to ensure you that you have exactly the amount of protection you need whether your need for care is for 2 years or 10 years or more.
Will work vs. might work.
So, you might be wondering what does it cost to obtain the Unlimited Lifetime benefit period? Is Lifetime coverage affordable? What is the difference in premium to move from the limited benefit period policy to the Lifetime benefit period policy?
You have two underwriters that will offer you Unlimited benefit periods as an option today.
- National Guardian Life
OneAmerica offers the Unlimited LTC benefit period option through its hybrid asset based long term care policies.
Asset based policies provide long term care benefits to you if care is needed, and a cash value death benefit to your estate if care is not needed.
National Guardian Life offers stand-alone traditional long term care insurance policies. With National Guardian Life, your policy will not provide you with any cash value if care is not needed.
So, to receive the unlimited benefit period, you will be able to consider either an asset-based policy or a stand-alone traditional LTC policy.
Let's look at comparative pricing for you with each option.
Should You Buy Lifetime Long Term Care Benefit Periods?
Asset Based hybrid LTC policies
The primary underwriter of the Lifetime benefit period is OneAmerica through its market leading Asset Care policy. For over 32 years, OneAmerica has issued Lifetime benefits within its asset-based policies. Of the two underwriters that still offer you Lifetime benefit periods, I do find that the current pricing of the OneAmerica policy within its respective arena is very compelling.
Asset based policies are often funded with single pay premiums, but you can fund your plan with installment premiums over 5, 10 or 20 years, as well. IRA rollovers are also acceptable with OneAmerica.
Let's look at single pay Unlimited benefit premiums for 65-year-old applicants. OneAmerica does have a limited benefit period option of 75 months to consider as well. Here are the premiums for a $5000 monthly LTC benefit.
Male age 65
72 months benefit period $94,481 (Securian)
75 months benefit period $95,534 (OneAmerica)
Lifetime benefit period $102,765 (OneAmerica)
Female age 65
72 months benefit period $103,396 (Securian)
75 months benefit period $103,422 (OneAmerica)
Lifetime benefit period $124,100 (OneAmerica)
Joint Life Male age 65 and Female age 65
Lifetime benefit period $156,270 (OneAmerica)
You can quickly see that there is not much difference in premium at all to move from the limited benefit period model to the Unlimited Lifetime benefit period option with OneAmerica. 7% for men, and 20% for women.
The joint life couples pricing for Unlimited benefit periods with OneAmerica is exceptionally attractive! A couple can buy the joint life unlimited policy for only $156,270 instead of depositing a cumulative $226,865 for individual unlimited benefit period policies.
If you are a 65-year-old couple you can deposit a single pay premium of $156,270 and immediately own a death benefit of $166,667 if you do not need care; otherwise, if either of you need care you each will have long term care benefits of $5000 per month per person for your entire Lifetimes. Here is the joint life illustration. This is a great value within the marketplace.
The OneAmerica Asset Care pricing for Unlimited benefits is extremely attractive. You will be able to obtain Unlimited benefits of the hybrid policy for reasonable premium, not entirely different than the premiums for limited benefit period options with alternative underwriters such as Securian, Lincoln and Nationwide.
Unlimited Lifetime LTC Benefits on LTC Annuities
Not only does OneAmerica offer Unlimited benefits on its Asset Care policy, but OneAmerica also offers Unlimited benefits as an option on its Annuity Care policies.
You might be attracted to the OneAmerica Annuity Care policy if you happen to own a non-qualified annuity that you prefer to exchange for a long-term care annuity on a tax-free basis.
Here is an illustration for the Indexed Annuity Care policy with OneAmerica.
You may add either a limited benefit period or a Lifetime LTC rider to the annuity.
$5000 monthly LTC benefit, 2 year benefit period LTC Rider, $859 annual premium
$5000 monthly LTC benefit, 4 year benefit period LTC Rider: $1425 annual premium
$5000 monthly LTC benefit, Lifetime benefit period LTC Rider: $2357 annual premium
These annual LTC Rider premiums are guaranteed. When compared to traditional LTC policy premiums, I find all of these annual premium options on the LTC Riders by OneAmerica to be inexpensive. At these levels, why not just buy Unlimited with OneAmerica.
Unlimited LTC Benefits on Traditional LTC Policies
While OneAmerica is the only underwriter that will offer you Unlimited benefits on asset-based policies, National Guardian Life is the only underwriter that will offer you Unlimited benefits on the traditional LTC policies.
I do not however, find the National Guardian Life pricing for its Unlimited benefit period option to be even remotely as attractive as the OneAmerica pricing for its asset-based policies.
Here are the National Guardian Life rates for its traditional LTC policies:
Age 65, $200.00 daily benefit
Male, National Guardian Life Pricing
3-year benefit period: $194.88 month (Mutual of Omaha $202.46)
4-year benefit period: $229.90 month (Mutual of Omaha $227.46)
5-year benefit period: $253.34 month (Mutual of Omaha $252.08)
6-year benefit period: $282.58 month (Mutual of Omaha $286.38)
Unlimited: $448.22 month
Female, National Guardian Life Pricing
3-year benefit period: $318.67 month (Mutual of Omaha $318.87)
4-year benefit period: $376.04 month (Mutual of Omaha $381.50)
5-year benefit period: $414.28 month (Mutual of Omaha $435.82)
6-year benefit period: $462.08 month (Mutual of Omaha $489.63)
Unlimited: $732.95 month
As you can see, the National Guardian Life value proposition to purchase the Unlimited benefit period is not quite as attractive as the OneAmerica pricing when compared with the limited benefit period options.
And you can see that National Guardian's pricing is almost identical to Mutual of Omaha's pricing for limited benefit periods plans.
National Guardian's limited benefit period pricing is very good, but for whatever reason the Unlimited benefit period pricing with National Guardian jumps up a lot.
Here, in the traditional LTC policy arena with National Guardian it will be a 58% increase in cost for you to move up from the 6-year benefit period to the Unlimited benefit period.
Are Unlimited benefits worth 58% more than 6-year benefit periods with traditional LTC insurance?
Well, certainly this is a much more difficult choice than it is in the asset-based arena where your OneAmerica Asset Care pricing for Unlimited LTC benefits is certainly more competitive and attractive relative to the alternative limited benefit hybrid policy options.
Should you be seeking Unlimited long term care insurance benefits, OneAmerica will ultimately be your underwriter. (Most likely)
More people are buying asset-based policies today, anyway.
Conclusions on Lifetime LTC Benefit Periods
I began underwriting long-term care insurance in 1998. For the most part, the majority of my clients 25 years ago selected the Unlimited benefit period when applying for coverage. Understandable since we were doing long term care planning, not short-term care planning.
As the years went by a major shift happened in our industry. The actuarial data began to illustrate that you and I are living longer.
Claims are lasting longer than originally thought.
20% of claims will last longer than 5 years. With Alzheimer's diagnoses, you can expect to need care for 8 years. Often longer.
Many insurance companies made the decision to either stop offering Unlimited benefit periods (shift the tail end risk back to you), or to leave the long-term care insurance arena altogether.
Fortunately, however, you still have the option to consider and obtain Lifetime LTC coverage. And fortunately, OneAmerica, the original purveyor of asset-based Lifetime benefit periods is still underwriting 32 years later.
If you believe (as I do) that the purpose of insurance is to protect you against the catastrophic event, then you should ultimately be considering Lifetime LTC coverage.
You are not average. Your planning should not be average.
Will work vs might work.
To fully explore and review your long term care insurance options, please contact me directly at (800) 891-5824.
Or you may request a quote through my online form. I will be pleased to answer all of your questions and provide personalized advice and illustrations for you.
Thank you for reading my blog.
Jack Lenenberg, J.D.