The proverbial silver tsunami is sweeping across America and the need for long term care protection is at an all time high, but the perfect economic storm has brought the long term care insurance business to a near standstill. Just as many Americans are learning to adjust for today’s new economic realities, insurers are scrambling to do the same. Juggling rates of all kinds (interest rates, lapsation rates, morbidity rates, and termination rates), most insurers have been compelled to raise premiums, toughen underwriting, decrease discounts, and pare down benefits to keep their products viable. Others have simply exited the market to avoid the entire ugly mess.
While it’s no surprise that traditional LTC sales have suffered as a result, it is surprising that alternatively designed linked-benefit LTC sales have grown more than 50% in each of the last two years and are on track to do the same in 2012.
“The reason for this is simple,” explains Gene Pastula of Westland Financial, the country’s leading provider of linked-benefit LTC. “Seniors still need long term care protection and they still need a safe place to put their money. Linked-benefit LTC gives them both.â€
If You Don’t Use It, You Don’t Lose It
A linked-benefit long term care plan (also called an asset-based, hybrid, or combination plan) is truly a horse of a different color. Unlike most traditional policies whose premiums are non-refundable, the most popular linked-benefit plans provide a full premium refund. Even if the policyholder dies without tapping their policy benefits, the premium is returned to a beneficiary through a death benefit. For consumers who don’t like the idea of paying for insurance they may never use, but who don’t want to tempt fate and forgo coverage, linked-benefit long term care plans provide an attractive solution and a better way to self-insure.
The concept isn’t new – Lincoln has been selling it’s industry-leading MoneyGuard program since 1988 – but it is a concept that’s finally come of age. With traditional products in decline, many insurers are developing their own linked-benefit programs. Genworth and State Life/OneAmerica are two of the companies that have thrown their hats into this ring. Let’s take a look at the linked-benefit plans from all three of these insurers and see how they compare.
Financial Strength
Since insurance policies are only as good as the companies backing them, it’s good to know that Lincoln, Genworth, and State Life/OneAmerica are top-rated carriers. All three insurers have excellent financial ratings, so they’ll be there when your family needs them most.
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| Company | Lincoln Financial | Genworth Financial | State Life/OneAmerica |
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| A.M. Best | A+ | A | A+ |
| Moodys | A2 | A3 | No Rating |
| Standard & Poor’s | AA- | A- | AA- |
| Fitch | A+ | No Rating | No Rating |
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| Managed Assets | $168 billion | $100 billion | $26 billion |
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Now that we know your money is safe with all three of these insurers, let’s take a detailed look at policy features.
Plan Features
Lincoln MoneyGuard, Genworth TLC and State Life Asset-Care I are all qualified long term care plans that provide monthly funds to pay for long term care, but there are several key differences between them that effect your premium, underwriting, deductible, and liquidity. These are differences that can make a real impact on your bottom line, so let’s do a side-by-side comparison of plan features and learn how these can effect you.
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| Company | Lincoln Financial | Genworth Financial | State Life |
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| Product | MoneyGuard | TLC | Asset-Care I |
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| Return of Premium | 100% Life of the Policy |
100% Life of the Policy (After 2 years) |
100% Life of the Policy (Minus Rider Costs*) |
| Inflation Protection | Yes | Yes | Yes |
| Guaranteed Death Benefit | Yes | Yes | Yes |
| Good Health Discount | No | Yes | No |
| Marital Discount | No | Yes | No |
| Joint Policy | No | No | Yes |
| Underwriting | Simplified | Full | Full |
| Deductible: Home Care | No Deductible | No Deductible | 60 Days |
| Deductible: Facility Care | 90 Days | 90 Days | 60 Days |
| Issue Ages | 30-80 | 18-79 | 40-80 |
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Lincoln MoneyGuard. This industry stalwart still holds its own against newer competitors with simplified underwriting and a 100% guaranteed premium refund for the life of the policy. Note that MoneyGuard only has a standard health rating, so those with less-than-average health are likely to be denied coverage.
Genworth TLC (Total Living Coverage). The industry’s largest long term care insurer makes a big splash with a competitive product and significant discounts. TLC requires full underwriting, but this is a worthy endeavor for those with excellent health. Note that TLC is not fully refundable for the first two years of the contract.
State Life Asset-Care I. This insurer’s policy doesn’t provide full premium refundability or the same long term care coverage as Lincoln or Genworth, but it offers two options they don’t – lifetime coverage and joint coverage.
Benefits
Now that we understand a little more about these three plans, let’s take a look at the numbers and see which of them provides the most bang for your long term care buck. To keep this simple, we compared quotes for a female applicant ages 55, 65, and 75 with $100,000 available to move into one of these plans.
Female Applicant – $100,000
| Lincoln MoneyGuard | Age 55 | Age 55 | Age 65 | Age 75 |
| 3% Inflation | ||||
| Non-Tobacco | ||||
| Monthly Benefit: Age 80 | $8,131 | $10,002 | $6,255 | $3,122 |
| Benefit Duration | 6 Years | 6 Years | 6 Years | 7 Years |
| Death Benefit | $195,127 | $114,658 | $150,121 | $112,387 |
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| Genworth TLC | Age 55 | Age 55 | Age 65 | Age 75 |
| 3% Inflation | ||||
| Standard Non Smoking | ||||
| Monthly Benefit: Age 80 | $7,673 | $9,036 | $5,629 | $2,974 |
| Benefit Duration | 6 Years | 6 Years | 6 Years | 7 Years |
| Death Benefit | $184,153 | $103,583 | $135,103 | $107,078 |
| 10% Marital Discount | ||||
| Monthly Benefit: Age 80 | $7,856 | $9,669 | $5,780 | $3,084 |
| Benefit Duration | 6 Years | 6 Years | 6 Years | 7 Years |
| Death Benefit | $188,544 | $110,832 | $138,723 | $111,017 |
| 15% Preferred Health Discount | ||||
| Monthly Benefit: Age 80 | $9,190 | $11,207 | $6,674 | $3,265 |
| Benefit Duration | 6 Years | 6 Years | 6 Years | 7 Years |
| Death Benefit | $220,556 | $128,461 | $160,183 | $117,526 |
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| State Life Asset-Care I* | Age 55 | Age 55 | Age 65 | Age 75 |
| 3% Inflation | ||||
| Preferred Non-Smoking | ||||
| Monthly Benefit: Age 80 | $6,579 | $13,044 | $4,835 | $3,664 |
| Benefit Duration | 5.5 Years | 5.5 Years | 5.5 Years | 5.5 Years |
| Death Benefit | $219,288 | $207,654 | $161,172 | $122,134 |
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That’s a lot of numbers to digest and, to be fair, there are many ways to tweak plan designs for all three of these programs. Benefits may even differ by state. Never the less, when comparing these for long term care coverage, the clear winners are Lincoln MoneyGuard and Genworth TLC.
- Lincoln MoneyGuard provides the greatest benefit and easiest application for those with average health.
- Genworth TLC provides a greater benefit for those with better-than-average health who go through full underwriting and qualify for a Preferred Health Discount.
- State Life Asset-Care I does not provide the same level of benefits in a limited-term individual plan design.
In summary, it’s easy to see that Lincoln MoneyGuard and Genworth TLC really shine in this head-to-head battle; they both provide substantial long term care benefits and real premium liquidity. State Life Asset-Care I is a great solution if you and your partner want to share a policy or would like to buy lifetime coverage.
Learn More About These Plans
*Unlike MoneyGuard and TLC, Asset-Care separates the policy cost into two components – a premium and a continuation of benefits rider. For illustration purposes, we have combined these components, but the premium refund guarantee does not apply to the cost of the benefits rider. In these illustrations, the cost of the benefits rider was 7-12% of the total, so in practical terms only 88-93% of the policy is truly refundable.
