Show me the money!  What happens if you suffer a catastrophic disability and don't die?  A Disability Model LTCi product may be the answer.

 A small number of carriers have built a disability modeled Long Term Care Insurance policy.  These policies are based on a disability model, meaning that once coverage is triggered and the elimination period is met, it pays the full monthly benefit regardless of expenses, end of story.  It doesn't reimburse or indemnify for covered expenses.  It simply pays when you suffer a chronic illness or disability as defined in the contract.

As a result, there are a number of significant benefits that place an indefinable value with this type of contract.  First, the insured has total control over how the money is to be spent.  No more worrying about whether or not the care actually received in 20 years will be considered "covered care".  If they so choose, the cash can be used to pay a mortgage or by groceries.

Second, this model virtually guarantees full monthly payment out of the contract.  No other model can claim that.  Third, some of these contracts have no exclusions what so ever.  So what we have here is a Long Term Care Insurance policy that pays benefits like a disability policy.  In addition, it doesn't go away at age 65, financial underwriting only relates to suitability not income, there is no occupational underwriting, and premiums are not gender based.

This makes this contract perfect as a catastrophic disability or income replacement policy.  But as important, at retirement it stays in force and performs as a first rate long term care insurance policy.

Now that these policies offer up to a $12,000 in a 30 day month, it's time to take a look at a brand new market.

This market is insuring younger people with a high benefit level and short benefit period to deliver a large amount of cash if they suffer a catastrophic illness or accident.  Not unlike the life insurance market that delivers a large lump sum at death, these contracts deliver large monthly benefits to help in the transition of lifestyles in the event of a non-death tragedy.

Case Design

In regards to case design, I think it's fair to say that cost is a factor in almost all circumstances.  Therefore, the following design is based on cost, value to the insured and industry insight.

We know that average issues ages within the LTCi industry are going down.  However, very few 30 to 45 years olds purchase long term care insurance.  It is this fact that I base the following argument upon.  First, if a healthy 35 year old doesn't buy LTCi today, but instead waits until the age of 60 to buy, (assuming good health at age 60), is it wrong to buy at age 60?  The answer of course is no.  Second, if the same person bought some LTCi today and added to the contract later, would that be wrong?  No, in fact it would be better than the first assumption because at least a portion of the benefit would be based on an original issue age of 35 instead of it being purchased at age 60.  Also, the issue of insurability is a factor, as well as, what would happen if the insured went on claim between the ages of 35 and 60.

Therefore, my case design is based upon purchasing a large monthly benefit, short benefit period and utilizing a 5% Simple Inflation Protection.   

Sample Case

Thirty-five year-old, husband and wife, landscaping contractor, doctor, international business consultant, you get the idea, any occupation; owns little or no disability insurance.  Owns no long term care insurance and is covered with $500,000 of life insurance.  Starting to sound familiar?

What happens if one person suffers a chronic illness or disability and doesn't die?  The life insurance doesn't pay and there is little or no disability insurance.  This person or family is going to need cold hard cash, and a lot of it.

Policy Design

The policy design is rooted in simplicity.  In this case we present a $6000 a month, 48 month benefit period, 60-day elimination period, 100% coverage for home health care, restoration of benefits, and 5% simple inflation protection.  It's basically a $288,000 policy to be paid out monthly over a four-year period.

As for cost, assuming best rates based on health and spousal discounts, the premium will be in the $905 per year range.

Price Comparison

Compare price you say?  How do we do that?  Disability insurance cannot be designed like this, so price shopping is impossible.  Not to mention that most disability policies will lapse at retirement.

Traditional long term care insurance cannot be compared to this because of the little component called "covered expenses".

What needs to be compared here is value.  What is it worth to protect a way of life, to provide financial protection when a clear gap in that protection exists?

Is $82 a month too much?  Bases on an income of $75,000, is 1% too expensive?  Let’s face it; most of our insured's spend that much on a good dinner each month.  However, if that is outside the spending limits of your client, if the monthly limit is dropped from $6000 per month to $4500 per month, the premium is reduced to $678 per year range or $62 per month.  This still offers up a total benefit of $216,000.

Now there is no cost argument to be had.  The current market that exists for this type of protection is massive.  Remember to keep it simple.  Large monthly benefits, disability model for payment and short benefit periods.  Consumers want value today, not in 30 years.

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