This document discusses long term care planning and funding options. It notes that traditional long term care insurance is struggling due to factors like low interest rates and rising costs of care. About 68% of people over 65 will need long term care services, costing an average of $150,000. Purchasing long term care insurance can help cover costs and protect assets, but it's important to purchase early before health issues affect coverage. The document compares long term care insurance options like traditional policies, life insurance policies with riders, and self-insuring versus relying on family or Medicaid. It emphasizes starting the long term care conversation early.

1. Long Term Care
Insurance
The Need and Methods of Funding

2. In the last 10 years . . .
Changes to Traditional Long Term Care Insurance Plans:
• Over 100 to less than 25 carriers
• Most group LTC carriers threw in the towel
• “Unlimited” benefits are gone
• Inflation protection has become prohibitively expensive
• Almost all LTC carriers have raised premiums on in force business
• Short pay is gone
• Underwriting is much more stringent
How can you help your client in such a challenging environment?
And why would you bother?
Reasons traditional LTC is struggling:
• Low interest rates
• Low lapse rate (1-2% rather than 5-6%)
• Rising cost of care
• Longer benefit periods

3. The “Why:” Understanding the Need
The need for care is created by:
• A chronic medical condition that compromises the
individual’s ability to perform the most basic of daily routines
(the 6 Activities of Daily Living); or
• A cognitive impairment that compromises his ability to safely
interact with his environment (i.e., Alzheimer’s)

4. Likelihood of Need
68%: The probability that an individual over age 65 will become
cognitively impaired or unable to complete at least two "activities
of daily living“ (statistic includes short term, 1 in 5)
40%: Percentage of individuals who reach age 65 who will enter
a nursing home during their lifetimes
2.5: Average length of stay in a nursing home
Alzheimer’s: Most frequent claim (at nearly 20%). AD average
length from diagnosis to death: 8-10 years
50%: Likelihood an insured that purchases a traditional LTC
policy at 60 will use it before death

5. Home Care
Homemaker services
2014 $3,051
2044 $7,406
Home health aide
2014 $3,314
2044 $8,044
Adult Day Health Care
Adult day health care
2014 $1,192
2044 $2,893
Assisted Living Facility
Private, one bedroom
2014 $3,650
2044 $8,860
Nursing Home Care
Semi-private room
2014 $5,627
2044 $13,658
Private room
2014 $6,144
2044 $14,913
Knoxville, TN
Monthly Cost
of Care:
2014 vs. 2044
3% annual
inflation*
*Private Nursing Home five-year annual growth: 4.19%

6. 2014-2016: 4 year private room in a nursing home (without
factoring in inflation):
$294,912
2044-2046: 4 year private room in a nursing home (assuming
3% inflation until 2044):
$715,824

7. Methods to Meet the Long Term Care Need
• My family will take care of me
• I will fully self insure
• I will spend down my assets and rely on
Medicaid
• I will purchase insurance to fully cover my
potential risk
• I will purchase insurance to cover the majority
of my risk, and self insure the remainder

8. My family will take care of me.
• The average weekly time requirement for caregivers is 21
hours
• 1/3 of caregivers must provide 30 or more hours of care
per week
• Adverse impact on caregiver’s career, as well as emotional
and physical well-being
• Your family’s role should be supervisory in nature

9. I will fully self insure.
• Do you have money sitting in a bucket for this significant
and likely expense?
• If care is paid for from your retirement portfolio, it
requires a reallocation of income. If the need for care
lasts long enough it leads to an unintended invasion of
principal.
• Unnecessary taxes due to unintended sale of assets.
• Can undermine the financial viability of the surviving
spouse or children who may depend on an inheritance.
• Liquidity issues: assuming assets can be converted to
cash, will they incur a loss because of market conditions?
• Lost investment opportunity for liquidated assets.
• Beyond the financial: coordination of care (who, where,
and how)

10. Our aging population:
37 million: Number of Americans age 65 or older in 2005.
81 million: Expected number of Americans age 65 or older in
2050.
Can Medicaid and its long term care provider partners handle the
influx?
I will spend down my assets and rely on Medicaid.
• Quality of life and the retirement plan you’ve built go out
the door
• Medicaid reform- raising disability threshold and
tightening income requirements
• Medicaid access and quality issues
• A safety net without the guarantees

11. I will purchase insurance to fully cover my potential risk.
• Too many variables to completely negate risk
• Cost of care and inflation
• Benefit Period
• Premium guarantees, or lack thereof

12. The viable solution: I will purchase insurance to cover
the majority of my risk, and self insure the remainder.
Major considerations when buying:
•Cost of Care
•Age to Apply
•Length of Benefit Period
•Inflation Protection
•Guarantees
•What is Covered
•How it pays- Reimbursement vs. Indemnity

13. How many of you talk to your working-years clients about
disability insurance?
How many of you talk to your clients about long term care
insurance?

14. When should your client purchase coverage?
Underwriting
Traditional LTC application denial statistics:
• Under age 50: 9.5%
• 50 to 59: 14.0%
• 60 to 69: 23%
• 70-79: 45%
• 80 and Over: 66%
Inflation
Predict most likely period of need, account for rising cost of care

15. Long Term Care Insurance Products
•Traditional LTC
•Guaranteed Universal Life (UL) with long term care
rider*
•Indexed Universal Life (IUL) with long term care rider
•Whole Life with long term care rider
•Second-to-die Whole Life with long term care rider
*Not all riders are created equally. Make sure the coverage has a
true LTC rider rather than an Accelerated Death Benefit Rider.
There is no “one size fits all” in this market.

16. Couple- Age 45
Type of Product Carrier Inflation
Monthly LTC
Benefit
Benefit
Period Benefit Pool Type of LTC Pay
Traditional LTC Transamerica None $10,200 5 Years $612,000 Reimbursement
Genworth 3% Compound $5,000 5 Years Subject to Inflation Reimbursement
Genworth 5% Compound $5,000 5 Years Subject to Inflation Reimbursement
Guaranteed UL Transamerica None $10,000 50 Months $500,000 Indemnity
Transamerica None $10,000 50 Months $500,000 Indemnity
Genworth None $10,266 4 Years $492,768 Reimbursement
Indexed UL John Hancock None $10,000 50 Months $500,000 Reimbursement
John Hancock None $10,000 50 Months $500,000 Reimbursement
Whole Life Guardian None $10,000 50 Months $500,000 Indemnity
Guardian None $10,000 50 Months $500,000 Indemnity
Whole Life- 2nd to Die State Life None $10,000 Lifetime N/A Reimbursement
State Life None $10,000 Lifetime N/A Reimbursement
Type of Product Carrier Death Benefit
Projected
Cash Value
Year 30 (total
both insureds)
Projected
Death
Benefit Year
30 (total
Traditional LTC Transamerica None N/A N/A
Genworth None N/A N/A
Genworth None N/A N/A
Guaranteed UL Transamerica $500,000 each insured N/A $1,000,000
Transamerica $500,000 each insured N/A $1,000,000
Genworth $246,736 each insured N/A $493,472
Indexed UL John Hancock $500,000 each insured $1,326,945 $2,011,832
John Hancock $500,000 each insured $1,901,776 $2,891,750
Whole Life Guardian $555,555 each insured $1,020,965 $1,770,212
Guardian $555,555 each insured $608,066 $1,214,924
Whole Life- 2nd to Die State Life $333,333 second to dieN/A $166,667
State Life $333,333 second to dieN/A $166,667
Type of Product Carrier Pay Schedule Premium
30 Year
Outlay
Guarantee
Information
Traditional LTC Transamerica Pay All Years $3,697 $110,910 Assessable Premium
Genworth Pay All Years $3,165 $94,950 Assessable Premium
Genworth Pay All Years $5,852 $175,560 Assessable Premium
Guaranteed UL Transamerica Pay All Years $8,444 $253,320 Guaranteed Premium, LTC, and Death Benefit
Transamerica 20 Pay $10,860 $217,200 Guaranteed Premium, LTC, and Death Benefit
Genworth Single Pay $137,000 $137,000 Guaranteed Premium, LTC, and Death Benefit
Indexed UL John Hancock Pay All Years $16,275 $488,250 Guaranteed Segment Floor Rate
John Hancock 20 Pay $25,303 $506,060 Guaranteed Segment Floor Rate
Whole Life Guardian Pay All Years $21,067 $632,010 Guaranteed Interest Rate (dividend floor)
Guardian Short Pay $21,067 $335,210 Guaranteed Interest Rate (dividend floor)
Whole Life- 2nd to Die State Life Pay All Years $5,522 $165,660 Guaranteed Base and LTC Rider Premium, Death Benefit
State Life Single Pay $114,182 $114,182 Guaranteed Base and LTC Rider Premium, Death Benefit

17. Couple- Age 60
Type of Product Carrier Inflation
Monthly LTC
Benefit Benefit Period Benefit Pool Type of LTC Pay
Traditional LTC Mutual of Omaha None $5,100 5 Years $306,000 Reimbursement
Genworth 3% Compound $5,000 5 Years Subject to Inflation Reimbursement
Guaranteed UL Transamerica None $5,000 50 Months $250,000 Indemnity
Transamerica None $5,000 50 Months $250,000 Indemnity
Genworth None $5,000 4 Years $240,000 Reimbursement
Whole Life Guardian None $5,000 50 Months $250,000 Indemnity
Guardian None $5,000 50 Months $250,000 Indemnity
Whole Life- 2nd to Die State Life None $5,000 Lifetime N/A Reimbursement
State Life None $5,000 Lifetime N/A Reimbursement
Type of Product Carrier Life Ins Benefit
Projected
Cash Value
Year 20 (total
both
Projected
Death Benefit
Year 20 (total
both insureds)
Traditional LTC Mutual of Omaha None N/A N/A
Genworth None N/A N/A
Guaranteed UL Transamerica $250,000 each insured N/A $500,000
Transamerica $250,000 each insured N/A $500,000
Genworth $120,500 each insured N/A $241,000
Whole Life Guardian $277,777 each insured $484,831 $833,548
Guardian $277,777 each insured $372,347 $682,608
Whole Life- 2nd to Die State Life $166,667 second to die N/A $166,667
State Life $166,667 second to die N/A $166,667
Type of Product Carrier Pay Schedule Premium 20 Year Outlay
Guarantee
Information
Traditional LTC Mutual of Omaha Pay All Years $3,020 $60,400 Assessable Premium
Genworth Pay All Years $4,907 $98,140 Assessable Premium
Guaranteed UL Transamerica Pay All Years $8,933 $178,660 Guaranteed Premium, LTC, and Death Benefit
Transamerica 20 Pay $10,752 $215,040 Guaranteed Premium, LTC, and Death Benefit
Genworth Single Pay $108,500 $108,500 Guaranteed Premium, LTC, and Death Benefit
Whole Life Guardian Pay All Years $21,171 $423,420 Guaranteed Interest Rate (dividend floor)
Guardian Short Pay $21,171 $324,834 Guaranteed Interest Rate (dividend floor)
Whole Life- 2nd to Die State Life Pay All Years $5,903 $118,060 Guaranteed Base and LTC Rider Premium, Death Benefit
State Life Single Pay $101,948 $101,948 Guaranteed Base and LTC Rider Premium, Death Benefit

18. Takeaways
• Long Term Care planning should be part of the financial
plans you design
• Better to allocate cost now rather than drain retirement
income or assets under management
• It’s never too early to start the conversation about LTC
• Rely on experts to help you find the best solution for your
client

19. Questions?
Heath Hildreth
865-691-4652
hhildreth@hildrethins.com