Life insurance with Long term care rider

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camptalcott
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Life insurance with Long term care rider

Post by camptalcott »

So I'm trying to make a decision about Long term care insurance. I've read all the horror stories of not having it and the statistical information of why I will definitely need it down the road.

I totally admit that I've been hesitate, the price is crazy expensive and I hate the "use it or lose it" set up.

I have prudential life insurance and my agent just informed me that they are now offering "riders" on policies. Basically I can supposed borrow up to the amount of the policy for ltc if needed. If never need it acts as a regular life insurance policy.

Anyone have any experience with these?

I'm 54 and in excellent health so no issues qualifying.
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mtnlover
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Re: Life insurance with Long term care rider

Post by mtnlover »

This is not new with Prudential. Dear Hubby has a whole life policy issued in 1999. It includes a provision that pays 6 equal monthly payments if the insured is deemed "terminal" (basically 6 month life exp) and a separate provision that pays (lump sum or monthly as you choose) if insured has been confined to a nursing home for at least 6 months and is expected to remain for the rest of life. (No smart-aleck remarks about whole-life, please, Bogleheads...FIL was a Pru agent :-) I presume this will take care of DH. I guess I'll be out in the street...
technovelist
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Re: Life insurance with Long term care rider

Post by technovelist »

I have just bought a term policy from Prudential with this provision. One detail: the "living needs rider" payment is NOT a loan but an early payment (after actuarial reduction).

By the way, although some other companies offer this on their whole life policies, Prudential seems to be the only one who offers it on term policies. Also, there is no extra charge for this rider.

This was a significant benefit that convinced me to buy such a policy, since the normal "LTCi" policies that you can buy today are so horrible.
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ThePrune
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Re: Life insurance with Long term care rider

Post by ThePrune »

camptalcott, we'll be able to give more knowledgeable advice after you tell us the specific name of the Prudential life insurance policy and the name of the long term care rider.

I could spout off some generalities right now without this information, but frankly it would likely be a waste of time and posting thread space.
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camptalcott
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Re: Life insurance with Long term care rider

Post by camptalcott »

ThePrune wrote:camptalcott, we'll be able to give more knowledgeable advice after you tell us the specific name of the Prudential life insurance policy and the name of the long term care rider.

I could spout off some generalities right now without this information, but frankly it would likely be a waste of time and posting thread space.
thanks prune,

The Policy is called a Prulife universal protector. Type A (fixed) death Benefit with a Benefit Access rider.

quote from the summary report

"The benefitaccess Rider advances up to 100% of the policy's death benefit in the event that the insured becomes chronically ill as certified by a licensed health care practitioner. up to 5000 dollars a month.
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TN_INVEST
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Re: Life insurance with Long term care rider

Post by TN_INVEST »

This type of insurance policy allows the death benefit to be paid before you die (to cover long term care expenses).

There are a couple other companies that have similar policies (Pacific Life, Genworth, Lincoln, etc.).

i kinda like em, and think it's a pretty "neat" concept. It's not perfect, but I think if it helps folks get over the mental block of buying health insurance, then that's a pretty good thing for most folks.
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celia
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Re: Life insurance with Long term care rider

Post by celia »

TN_INVEST wrote: if it helps folks get over the mental block of buying health insurance,
I assume you mean Long Term Care Insurance.
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ThePrune
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Re: Life insurance with Long term care rider

Post by ThePrune »

camptalcott wrote:The Policy is called a Prulife universal protector. Type A (fixed) death Benefit with a Benefit Access rider.

quote from the summary report
"The benefitaccess Rider advances up to 100% of the policy's death benefit in the event that the insured becomes chronically ill as certified by a licensed health care practitioner. up to 5000 dollars a month.
Thanks for the details. The Benefit Access Rider brochure contains a far amount of detail, but I fear that many of those details may escape you unless you are very familiar with how Long Term Care Insurance works. Some of those details relate to when the benefits are taxable and when they aren't. In order to gain a minimal level of understanding, I suggest you look over the NAIC Shopper's Guide to Long-Term Care Insurance.

One of your planning steps is to estimate how many FUTURE dollars of long term care expenses you would want to have covered by the Benefit Access rider. For example, do you want to cover all of a "worst case" scenario (5 years in a nursing home, at about $85,000 / year in todays dollars, compounded at 4.0% annually to a point 25-40 years into the future), or only a portion of it, say 50%? This type of thinking allows you to set the UL policy Face Value, which controls your monthly insurance premium costs.

An important detail to check out: do you need to continue to pay insurance policy premiums even after needing long term care and starting to withdraw off the Benefit Access rider?

Another sneaky detail needed to evaluate any UL policy is the assumed interest earning rate for the accumulated cash value. Sales Agents will be tempted to use a high interest rate in the premium estimation process, because this makes the policy face value appear to be more affordable. Please insist on a policy illustration based on the current month's actual credited UL interest rate.

I also recommend that you carefully read the Benefit Access Rider FAQs document which has a lot more details than the brochure. (Ignore that fact that it was designed for the sales agent, not you as the consumer.)

Finally, don't purchase any policy without first requesting a full sample policy for both the UL insurance as well as for the Benefit Access rider. (I tried to find an online sample policy for the Benefit Access rider, but couldn't.) Force yourself to read it until you understand ALL the terms and restrictions. After all you will be counting on this policy to supply potential financial needs 25-40 years in the future. It will be a little late then to discover that your policy doesn't work the way you thought it would!

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Last edited by ThePrune on Sat Aug 23, 2014 7:36 am, edited 1 time in total.
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bluemarlin08
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Re: Life insurance with Long term care rider

Post by bluemarlin08 »

I am not selling these policies yet, but the more I review I sorta like them. However, to make them harder to understand they tie crediting rates to index returns, similar to Equity Index Annuities. These policies have the ability to use better performing illustrations than a typical Universal Life or whole life policy
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Re: Life insurance with Long term care rider

Post by mhalley »

Clark howard had a caller ask about them recently. Clark was not a fan.
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Re: Life insurance with Long term care rider

Post by ThePrune »

bluemarlin08 wrote:I am not selling these policies yet, but the more I review I sorta like them. However, to make them harder to understand they tie crediting rates to index returns, similar to Equity Index Annuities. These policies have the ability to use better performing illustrations than a typical Universal Life or whole life policy
The PruLife Universal Protector policy isn't Indexed Universal Life. The interest credited is based on earnings in the insurance company's bond-heavy General Account.

Looking over the various PruLife UL policy offerings, it's clear that their Universal Protector is designed to be a UL equivalent to term life insurance. This policy isn't designed to build-up large amounts of cash value that might be used for future spending. Rather, the purchaser targets to what age they want the fixed policy face value to last (e.g. age 95, 100, 105, etc.), then PruLife estimates an appropriate premium to keep the policy in force for that long. But because UL policies don't guarantee the interest credited to the accumulated cash value, there may need to be future adjustments made to the premiums in order to stay on track for the targeted age of coverage.
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Re: Life insurance with Long term care rider

Post by ThePrune »

camptalcott wrote:So I'm trying to make a decision about Long term care insurance. I've read all the horror stories of not having it and the statistical information of why I will definitely need it down the road.
I totally admit that I've been hesitate, the price is crazy expensive and I hate the "use it or lose it" set up.
Camptalcott, I just want to make sure that your understand that the Benefit Access rider will require you to pay an additional premium. That added premium is conceptually just the same as a long term care insurance premium that you hate so much. Therefore as you price this insurance policy, make sure to break out the cost of the UL life insurance from the cost of the rider. How would the rider cost each year compare to the cost of long term care insurance with a similar dollar benefit?

One other point. In reading at the PruLife website I noticed in the footnotes that there would be a $150 charge for processing a payment request based on the Benefits Access rider. What wasn't clear was whether that was a one-time charge, an annual charge, or a monthly charge. You'll want to get a clear answer to that question, because paying $150 for each month (worst case) is a not insignificant fee!
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skepticalobserver
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Re: Life insurance with Long term care rider

Post by skepticalobserver »

I heartily second the aforementioned cautionary comments. I would add that generally speaking it is easier to qualify for these long term care riders than stand alone nursing home policies.

In all likelihood whatever the rider may payout you will probably have make out-of-pocket contributions for nursing home costs.

Also, if you qualify, look into group long-term care plans where per diem and premium coverage may be more flexible.

Lastly, the comment by “thePrune” concerning accumulated cash value is spot on. You need to determine how interest is credited (floors,caps, time frame) and history of crediting under the PruLife General Account. If the policy requires a lump sum premium payment could you do better with, say, a medium term treasury zero and thus self-insure? If so, for life insurance, get term which is much cheaper. Have a CPA run the numbers
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Phineas J. Whoopee
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Re: Life insurance with Long term care rider

Post by Phineas J. Whoopee »

If the insurance company thought it would bear less risk and make more money by selling life insurance and long-term care insurance separately it would do so.

I personally do carry LTCI, and though I'm disturbed by horror stories, most of the ones I read are either experiences of people who bought before qualified plans were standardized, or people making stuff up to try to sell me something else instead.

I bought it before the Great Scary Premium Increases, but my premium did not increase.

I've said it before and I'll say it now: the primary purpose of LTCI is to avoid going to the nursing home. Qualified policies cover less drastic measures that Medicaid doesn't.

Whether it's worth the cost for any individual is of course an individuated decision. I'm not saying everybody should make my choice. Nobody today, in fact, has in all its details the choice I made, because the plan I have is no longer being sold.

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TN_INVEST
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Re: Life insurance with Long term care rider

Post by TN_INVEST »

celia wrote:
TN_INVEST wrote: if it helps folks get over the mental block of buying health insurance,
I assume you mean Long Term Care Insurance.

OK

Long term care insurance is a type of health insurance. Kinda like the rectangle/square stuff. I simply don't care to get all caught up in labels.
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Re: Life insurance with Long term care rider

Post by technovelist »

ThePrune wrote:
camptalcott wrote:So I'm trying to make a decision about Long term care insurance. I've read all the horror stories of not having it and the statistical information of why I will definitely need it down the road.
I totally admit that I've been hesitate, the price is crazy expensive and I hate the "use it or lose it" set up.
Camptalcott, I just want to make sure that your understand that the Benefit Access rider will require you to pay an additional premium. That added premium is conceptually just the same as a long term care insurance premium that you hate so much. Therefore as you price this insurance policy, make sure to break out the cost of the UL life insurance from the cost of the rider. How would the rider cost each year compare to the cost of long term care insurance with a similar dollar benefit?

One other point. In reading at the PruLife website I noticed in the footnotes that there would be a $150 charge for processing a payment request based on the Benefits Access rider. What wasn't clear was whether that was a one-time charge, an annual charge, or a monthly charge. You'll want to get a clear answer to that question, because paying $150 for each month (worst case) is a not insignificant fee!
I have a TERM, not UL, policy with Prudential that has this rider; the UL policies also have it. My understanding (and I have read the policy) is as follows:

1. There is NO additional premium for the rider. That is possible because the rider provides for early payment of the death benefit (after actuarial reduction), not additional payment beyond the death benefit.
2. There is a $150 charge if you ask for payment on this rider. I seriously doubt it is per month, because you can get the entire reduced death benefit as one payment if you want it, but I will check for confirmation on this.

Here is their detailed marketing material: http://www.ufc.bz/uploads/Website%20Mar ... ochure.pdf
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Re: Life insurance with Long term care rider

Post by bluemarlin08 »

If you have term, how long is the premium guaranteed?
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Re: Life insurance with Long term care rider

Post by technovelist »

bluemarlin08 wrote:If you have term, how long is the premium guaranteed?
If you're asking me, in my case the answer is "20 years".
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Re: Life insurance with Long term care rider

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technovelist wrote:I have a TERM, not UL, policy with Prudential that has this rider; the UL policies also have it. My understanding (and I have read the policy) is as follows:

1. There is NO additional premium for the rider. That is possible because the rider provides for early payment of the death benefit (after actuarial reduction), not additional payment beyond the death benefit.
2. There is a $150 charge if you ask for payment on this rider. I seriously doubt it is per month, because you can get the entire reduced death benefit as one payment if you want it, but I will check for confirmation on this.

Here is their detailed marketing material: http://www.ufc.bz/uploads/Website%20Mar ... ochure.pdf
Actually the rider YOU have is the "Living Needs Benefit" rider, but the rider camptalcott asked for feedback about is the "Benefit Access" rider. These riders work differently.

The Benefits Access rider definitely DOES have an additional premium associated with it.
Benefits Access Rider Brochure wrote:This optional rider is available for an additional premium and gives you access to the policy’s death benefit if the insured is certified by a licensed health care practitioner as chronically ill and otherwise meets the terms of the rider.
The reason that an additional premium MUST be charged is that this rider allows access to the FULL face value of the life insurance policy before death.

However the Living Needs Benefit rider you are referring to does NOT give you early access to the FULL face value of the policy.
Living Needs Benefit rider wrote:The maximum amount you can receive may approximate 70 to 80 percent of the death benefit for the Nursing Home Option and 90 to 95 percent for the Terminal Illness Option.
The insurance company covers the actuarial costs of a Dual Peril (either death OR long term care) by reducing the benefit paid for the early peril.

There's nothing mysterious or underhanded about this difference in potential benefit. Insurance companies are in the business of estimating the true costs of various risks we face and charging us a fair amount to take on those risks from us. If you think you're getting "something for nothing" in an insurance policy, its clear you haven't fully understand the policy.
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Re: Life insurance with Long term care rider

Post by dhodson »

That last line is so true in every insurance contract situation.
technovelist
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Re: Life insurance with Long term care rider

Post by technovelist »

ThePrune wrote:
technovelist wrote:I have a TERM, not UL, policy with Prudential that has this rider; the UL policies also have it. My understanding (and I have read the policy) is as follows:

1. There is NO additional premium for the rider. That is possible because the rider provides for early payment of the death benefit (after actuarial reduction), not additional payment beyond the death benefit.
2. There is a $150 charge if you ask for payment on this rider. I seriously doubt it is per month, because you can get the entire reduced death benefit as one payment if you want it, but I will check for confirmation on this.

Here is their detailed marketing material: http://www.ufc.bz/uploads/Website%20Mar ... ochure.pdf
Actually the rider YOU have is the "Living Needs Benefit" rider, but the rider camptalcott asked for feedback about is the "Benefit Access" rider. These riders work differently.

The Benefits Access rider definitely DOES have an additional premium associated with it.
Benefits Access Rider Brochure wrote:This optional rider is available for an additional premium and gives you access to the policy’s death benefit if the insured is certified by a licensed health care practitioner as chronically ill and otherwise meets the terms of the rider.
The reason that an additional premium MUST be charged is that this rider allows access to the FULL face value of the life insurance policy before death.

However the Living Needs Benefit rider you are referring to does NOT give you early access to the FULL face value of the policy.
Living Needs Benefit rider wrote:The maximum amount you can receive may approximate 70 to 80 percent of the death benefit for the Nursing Home Option and 90 to 95 percent for the Terminal Illness Option.
The insurance company covers the actuarial costs of a Dual Peril (either death OR long term care) by reducing the benefit paid for the early peril.

There's nothing mysterious or underhanded about this difference in potential benefit. Insurance companies are in the business of estimating the true costs of various risks we face and charging us a fair amount to take on those risks from us. If you think you're getting "something for nothing" in an insurance policy, its clear you haven't fully understand the policy.
I stand corrected about the different rider; thank you.
As to the reduction in benefit for early payment, I understand that reasonably well, having passed a couple of actuarial exams (many years ago, to be sure).
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bluemarlin08
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Re: Life insurance with Long term care rider

Post by bluemarlin08 »

So with the term policy that expires in 20 years, what is the long term care plans.
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Re: Life insurance with Long term care rider

Post by technovelist »

bluemarlin08 wrote:So with the term policy that expires in 20 years, what is the long term care plans.
I have the rider that allows me to access the policy benefits early. I'm not sure if that answers your question though. Could you clarify?
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Re: Life insurance with Long term care rider

Post by dhodson »

He means likely the term will be over when you need ltc so the rider won't help you then.
technovelist
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Re: Life insurance with Long term care rider

Post by technovelist »

dhodson wrote:He means likely the term will be over when you need ltc so the rider won't help you then.
My policy doesn't expire until age 85. I have assumed that most admissions are before that age, but I can't find any statistics on a quick search.

Edited to add: "An individual's average age when he or she moves into a nursing home is 79. "
(http://www.kappadelta.org/assets/1280/L ... _facts.pdf)
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bluemarlin08
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Re: Life insurance with Long term care rider

Post by bluemarlin08 »

Personal experience shows you have a good chance of living past 85. If you are comfortable with your plan it's all good.
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Re: Life insurance with Long term care rider

Post by Phineas J. Whoopee »

technovelist wrote:...
Edited to add: "An individual's average age when he or she moves into a nursing home is 79. "
(http://www.kappadelta.org/assets/1280/L ... _facts.pdf)
I wonder what my average age will be when I move into a nursing home.
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technovelist
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Re: Life insurance with Long term care rider

Post by technovelist »

bluemarlin08 wrote:Personal experience shows you have a good chance of living past 85. If you are comfortable with your plan it's all good.
I know that my chance of living past 85 is reasonable, given that I got approved at "Preferred Best" for a term policy to that age, even though the insurance company is counting on lapses to reduce premiums.

However, for my plan to fail, I have to live past 85 outside a nursing home, then have to go into a nursing home after that age. I think the probability of that is fairly low.

Also, I needed a new policy anyway because my old term one is about to run out of the guaranteed premium term. So I essentially get the nursing home part "free", which still sounds like a pretty good deal.
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Re: Life insurance with Long term care rider

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technovelist wrote:However, for my plan to fail, I have to live past 85 outside a nursing home, then have to go into a nursing home after that age. I think the probability of that is fairly low.
Since you have actuarial background, I refer you to the Society of Actuaries 1987 - 2007 Long Term Care and Intercompany Report
This is the sixth Intercompany Study of Long-Term Care Insurance. This report combines and analyzes data received from 35 insurers that agreed to provide information to further the knowledge of long-term care insurance. Those insurers are listed in Appendix A of the report. Available data was collected on policies issued between January 1, 1984 and December 31, 2007. Claims incurred on policies in force during this time were followed from claim inception through the earlier of claim termination, or June 30, 2008
As I read the data in Figure 1b of this study's main text, the incidence rate for long term care insurance claims increases steadily as people age. For example from the 2007 study:
Age 70-74: 0.55% incidence rate
Age 75-79: 1.31% incidence rate
Age 80-84: 2.82% incidence rate
Age 85-89: 5.30% incidence rate
Age 90+: 8.44% incidence rate

As I interpret the data (admittedly as a non-actuary), it looks to me like the odds of making a long term care claim increase greatly at age 85 and beyond.

If you think the odds of your surviving past age 85 are reasonably high, why wouldn't you think that the odds of your needing long term care at those ages are also getting much greater? True, long term care can encompass much more than a nursing home confinement, but there are still costs involved.
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Re: Life insurance with Long term care rider

Post by technovelist »

ThePrune wrote:
technovelist wrote:However, for my plan to fail, I have to live past 85 outside a nursing home, then have to go into a nursing home after that age. I think the probability of that is fairly low.
Since you have actuarial background, I refer you to the Society of Actuaries 1987 - 2007 Long Term Care and Intercompany Report
This is the sixth Intercompany Study of Long-Term Care Insurance. This report combines and analyzes data received from 35 insurers that agreed to provide information to further the knowledge of long-term care insurance. Those insurers are listed in Appendix A of the report. Available data was collected on policies issued between January 1, 1984 and December 31, 2007. Claims incurred on policies in force during this time were followed from claim inception through the earlier of claim termination, or June 30, 2008
As I read the data in Figure 1b of this study's main text, the incidence rate for long term care insurance claims increases steadily as people age. For example from the 2007 study:
Age 70-74: 0.55% incidence rate
Age 75-79: 1.31% incidence rate
Age 80-84: 2.82% incidence rate
Age 85-89: 5.30% incidence rate
Age 90+: 8.44% incidence rate

As I interpret the data (admittedly as a non-actuary), it looks to me like the odds of making a long term care claim increase greatly at age 85 and beyond.

If you think the odds of your surviving past age 85 are reasonably high, why wouldn't you think that the odds of your needing long term care at those ages are also getting much greater? True, long term care can encompass much more than a nursing home confinement, but there are still costs involved.
Yes, I would imagine that the probability does increase with age, just like mortality does. And I probably wouldn't have bought the policy just for the "LTCI" benefit. But given that:
1. I really HATE the official LTCI contracts and wouldn't buy one for that reason, and
2. I needed new life insurance anyway,

this seemed like a nice "freebie".
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Re: Life insurance with Long term care rider

Post by bluemarlin08 »

It is a freebie, the company priced as such.
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Re: Life insurance with Long term care rider

Post by technovelist »

After doing a bit of research I have found some information about my likelihood of living to 85.

According to the Society of Actuaries report on preferred risk mortality (https://www.soa.org/2001-cso-preferred- ... tables.pdf), the mortality rate of "preferred best" insureds is about 50% of the "normal" rate. So if the "normal" rate is similar to the SSA's tables (http://www.ssa.gov/oact/STATS/table4c6.html), then a calculation indicates that while my chances of living to 85 are about 37% according to the SSA table, my chances as a "preferred best" insured are about 61%.

There are a lot of assumptions there, of course, but it is still interesting...
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dhodson
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Re: Life insurance with Long term care rider

Post by dhodson »

bluemarlin08 wrote:It is a freebie, the company priced as such.

When even the agents agree, you know there is a problem
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Re: Life insurance with Long term care rider

Post by technovelist »

Then why don't all the companies offer it? It seems obvious that if it doesn't cost them anything, and it looks good even to a relatively informed prospective buyer, they should...
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Re: Life insurance with Long term care rider

Post by ThePrune »

technovelist wrote:And I probably wouldn't have bought the policy just for the "LTCI" benefit. But given that:
1. I really HATE the official LTCI contracts and wouldn't buy one for that reason, and
2. I needed new life insurance anyway,

this seemed like a nice "freebie".
I like your reasoning!
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