In your quest to learn about guaranteed universal life insurance (term for life) you may have discovered that some of these policies also have strong long-term care (LTC) insurance benefits. The costs and benefits of these riders vary widely and are often difficult to compare. This article will examine the long-term care riders and help you make an informed decision.
Comparing Guaranteed Universal Life Insurance Carriers and Products
If your primary need is life insurance and you are leaning towards GUL, then the most important matter is finding a top-notch carrier with very competitive rates. Long term care benefits are important, but finding the best possible GUL is a great starting point.
Comparing guaranteed universal life plans is simple in some ways, but difficult in other ways.
- Obtaining quick comparison quotes. Many sites, including this one, allow you to compare “lifetime” quotes so you can see how much it costs for GUL plans guaranteed to age 100.
- Apples-to-Apples. For the most part, it’s easy to compare GUL if you’re not including riders. Unlike cash-value policies, there aren’t several variables to consider.
- Getting an accurate comparison quote showing All the best carriers. Several top carriers aren’t available on any comparison quoting tool, so it’s imperative to request customized quotes from all the best companies offering GUL. Working with an experienced, independent agent is essential.
- Some products are guaranteed to age 100, but terminate at that age. Other products have a lifetime or “to age 121” guarantee. Many carriers allow you to shorten the guarantee period to age 90 or 95 for a lower premium. Make sure you’re comparing the same guaranteed age.
- Comparing riders such as the Accelerated Death Benefit and/or Chronic Illness, Long Term Care riders. This is the focus of this article and we will expand on this below.
Let’s assume you found three very good GUL plans and have questions about long term care. Is this really an important benefit?
What Is The Risk of Long Term Care?
For most people, protecting against the risk of long term care is an important subject. Nobody likes the thought of spending down their retirement savings on the extremely high costs of care. The most recent statistics show the following costs:
- $97,455 per year 2017 National Median Cost for Nursing Home (private room)
- $45,000 per year 2017 National Median Cost for Assisted Living Facility
- $48,000 per year 2017 National Median Cost for Home Health Services
- 2.8 years The average length of stay in a nursing home
For more information on long term care costs, including projected increases, please click here.
You may have considered LTC insurance policies and decided it wasn’t worth the cost. We offer traditional LTC policies with several leading carriers. For some people, this is the best course of action – especially if there is no need for life insurance. We provide our clients with a questionnaire to help determine the best strategy.
In recent years, alternative policy designs have been gaining traction and outpacing the growth of traditional long term care insurance. These products are often called “combo” or “hybrid” life and long-term care insurance. Guaranteed Universal life with LTC insurance is just one type of combo product. We will expand on other types of combo products below.
Use it or Lose it
Some people label traditional long term care insurance as a “use it or lose it” product. In essence, that is how most insurance products work. Your auto and homeowner’s insurance are policies you hope never to use. That’s why a “combo” life/long term care product is appealing. You are keeping it in the family.
If you don’t need the long term care, then your policy stays in tact and the death benefit goes to your spouse or children.
Rate Increases with Traditional LTC Insurance
Another drawback to traditional long term care insurance is the lack of premium guarantees. Most leading carriers have raised rates on policyholders. LTC insurance is relatively new and actuaries didn’t anticipate the high number of claims. Now, policies are priced more realistically (and much higher). The probability of rate increases is much lower. However, the risk of a rate increase in your 70s, 80s, or 90s is not one many are willing to take.
Most people who buy LTC insurance will eventually collect. This type of care is not covered by Medicare.
Types of GUL Chronic Illness and Long Term Care Benefits/Riders
You need to be careful when evaluating the LTC benefits with many carriers. There are three main types:
- Simple Accelerated Death Benefit for Chronic Illness or terminal illness, but not LTC. Although this type of policy doesn’t actually cover LTC, it is very popular.
- LTC Benefits/Riders that are a part of an Accelerated Death Benefit – at no additional cost – that allow you to accelerate a portion of the Death Benefit for LTC needs, but charge fees/interest at claim time. A lien is placed on the money that is accessed is deducted from the death benefit.
- LTC Riders that are separate from an Accelerated Death Benefit – at additional cost. Typically, this LTC insurance rider allows you to access the full death benefit for LTC needs with no fees, interest of liens.
The second and third type is an actual long term care rider that is specifically designed to cover long term care costs. The trigger for benefits is the same on traditional LTC insurance policies. You must be unable to perform 2 out of 6 activities of daily living or have a cognitive impairment such as Alzheimer’s or dementia. Upon diagnosis, the insured is allowed to access the death benefit, sometimes immediately or after a 90-day waiting period.
Examples of the Different GUL Long Term Care Riders:
- Columbus Life: An example of #2 is Columbus Life. Their Chronic Illness/LTC rider is a part of an Accelerated Death Benefit rider called Life Plus. This allows you to access up to half the death benefit for LTC needs, either as a lump sum (for 40%) or installments up to 3 to 10 years. A lien is placed on the amount accelerated. Several other carriers offer a similar benefit, but not as strong as Columbus Life.
- Nationwide: An example of #3 is Nationwide. They have a good LTC insurance rider (priced accordingly) that allows you to access 100% of the death benefit. There is a maximum monthly limit, but there are no fees or liens. This is like adding a separate LTC insurance policy to your GUL and the pool of benefits is your death benefit.
- Symetra: Some carriers offer both #2 and #3. An example of this is Symetra. With their GUL, you can access up to half the death benefit for LTC needs. You can also opt for their Chronic Illness Plus Rider for additional premium. The CI Plus is a rider that “allows you to access up to 100% of your net death benefit (paid out in 2% installments, subject to the IRS per diem limit).”
- American General (AIG) & Protective Life. These carriers (and several others) offer type #3 LTC riders at additional cost. Many other carriers offer a type #1 Accelerated Death Benefit, but it only covers terminal illness.
Which Type of LTC insurance benefit is better?
If you want to keep your premium lower, than selecting a rider that is “built in” at no additional cost is preferable. Since the death benefit will be paid to your beneficiary – – your spouse or child(ren) – then this could factor into your decision.
However, if you are willing to pay more for access to a larger pool of benefits, then type #3 is usually the better option.
It’s important to consider your options carefully with a trusted advisor, but don’t fall prey to analysis paralysis. We’ve seen this happen at times and can help clients make an informed decision.
There are numerous variations of the types of LTC riders outlined above. This is also a dynamic market as many carriers are improving their riders to be more competitive. A knowledgeable agent can make sure you are considering the important factors and comparing the best possible carriers.
Other Types of Combo Products
In addition to guaranteed universal life combo policies, there are other types of combo products. Many carriers offer a similar benefit on their whole life and other types of universal life policies. Some combo products are only available on a limited-pay basis. You can also select an asset-based annuity with long term care insurance.
It can be easy to suffer from paralysis analysis when examining all the options. We have a method and a questionnaire to help determine which type of policy or combo product is right for you.
Guaranteed Universal Life and Long Term Care Insurance Conclusion
First and foremost, GUL is an excellent product of people who want low-cost permanent life insurance without the moving parts of other types of policies. It is a simple, basic design that is fully guaranteed.
The benefit of long term care insurance has made these policies much more attractive. However, you need to compare costs and benefits of these riders, especially since they vary widely.
It is very important to work with an agent who has their finger on the pulse of this industry. Many carriers offer GUL, but the differences in the riders can be significant. An experienced, knowledgeable, independent agent can help you properly evaluate your options.
We will be glad to help you understand your options and prepare customized quotes for you. Please complete the quote request form on this page or call us anytime for a free consultation.