vs. Combo LTCI
A broker had a client age 70 in
average health that had been shown
an annuity product with a long term
care rider. The client was ready to
deposit $200,000 that was going to
earn 3.0% net interest (4% - 1% to
pay for LTCI rider). The LTCI rider
would provide $5,000 per month for
50 months (total pool $250,000). The
other agent had explained this is a
great product; if you need LTCI you
have coverage or if you need income
off the annuity you can have that.
We recommended the broker show
the client the benefits of having a
separate annuity PLUS a standalone
Long Term Care Insurance policy.
- Place $200,000 in an annuity
earning 4% interest; this
generates $8,000 per year in
- Buy a LTCI policy that had a
benefit pool of $262,800 that
could be accessed at a monthly
rate of $5,475 for 48 months or
at a rate of $5,000 for 52.5
- Using TAX-FREE Partial 1035
withdrawals to pay $2,705 for
LTCI policy from the annuity.
- OR add a 5% simple increase
rider and pay through TAX-FREE
Partial 1035 withdrawals $3,979.
How Plan was
- Broker asked the client
- Did the other agent explain
that if you use the policy for
Long Term Care you lose the
value of the annuity?
- Did he explain that if you
use the annuity you lose your
long term care coverage?
- Did he explain that since
you are required to use your
money first (principle and
interest) that you may never
collect any of the LTCI
- Broker then explained the
obvious benefits of having two
separate policies that provided
many more benefits. They then
took 2 applications one for the
annuity and one for the LTCi
- Client can pay for LTCi by
using TAX-FREE Partial 1035
Exchanges from the annuity.
- If client needs LTC they get
to keep their annuity and 100%
of the interest as the waiver of
premium pays for the LTCI. If
they need income off the annuity
they get to keep their LTCI.
- Broker did the right thing
for their client AND got paid