Costs and Leverage

The financial press has already started to criticize the "blended product" concept, claiming that it's more expensive for clients than buying life insurance and LTCI separately. But this analysis misses several salient points, which are as follows:

Singlepremium life insurance leverages the client's own assets to provide blended protection (life and LTC). Younger clients get more leverage than older clients, and women get more leverage than men (because women live longer).
Whichever side of the blended protection you don't use (life or LTC) winds up costing very little at all. In Asset Preserver and several competitive products, there is no extra charge for the accelerated death benefit. (The cost is built into standard premiums.) So, if you never need LTC, you still have your death benefit intact, and the LTC protection becomes economical.
Your LTC premiums won't increase, because you have already paid the premium and coverage terms are written into the contract. Also, your death benefit is guaranteed to stay level for life–which means LTC protection is constant. (In some contracts, a maximum fixed percentage of the death benefit can be accelerated.)
Insurance companies have incentive to write "blended policies," because a significant deterrent factor is built into them. To understand it, imagine a family that must fund LTC for grandma at age 80, when grandma has Alzheimer's and also a $200,000 death benefit that can be accelerated. The family can help grandma decide to either: 1) keep the death benefit intact for heirs and fund the LTC outofpocket; or 2) accelerate the benefit and apply it to LTC. Since it's the family's future benefit that is being spent on grandma's ALF, you can bet it will be spent wisely.

One attraction of "blended" singlepay policies is in the leverage they offer older women. Women are statistically more likely to need LTC than men because they live longer and are less likely to have caregivers at home. To illustrate this leverage, imagine a 70year old woman who puts a $100,000 single premium into another attractive blended product–Liberty Life's Estate Maximizer II. Her leverage factor is 1.70, which means every dollar of single premium immediately earns $1.70 of death benefit. Since this product accelerates up to 90% of death benefit, $100,000 of premium would leverage into $153,000 of LTC coverage–enough to pay for about 23 years in a nursing home or 34 years in an ALF. (For a male age 70, the same premium would buy a bit less LTC coverage, about $140,000.)

Instant Insights /

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