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Generally, not a good value to combine LTC with Life

Posted by Scott A. Olson on August 02, 2001 at 18:09:58:

In Reply to: LTC policies that are like Universal Life Policies? posted by Cindy Allen on July 25, 2001 at 17:21:45:

In my opinion, it is generally not a good value to purchase a Life/LTC combo product.

It sounds really good to buy one of these combo products. The sales pitch sounds great in fact. It says, "If you never need long term care, your premiums were never wasted because your beneficiaries get the death benefit." The problem is that your premiums are wasted... they are wasted on a very costly, low-interest, universal life or whole life policy. When you do the math, most of these policies only pay you about 3% per year on your money. If that's all you want to make, then fine... buy one of these policies. I think you'd be better off keeping your money, investing it yourself, and then using a portion of the return on your investment to buy a top notch ltci policy. The universal life policies will often have an "interest rate" of 7% or 8.5%, blah blah blah.... however those interest rates do not take into consideration mortality expenses, policy fees, and all kinds of hidden charges that suck the cash right out of your policy. If you do the math, you're only earning about 3% per year or less. I think that's a bad investment. The only way these combo products would pay well is if you did die suddenly in the first several years.... in that case you make out like a bandit....

sao

Follow Ups:

Re: Generally, not a good value to combine LTC with Life : In my opinion, it is generally not a good value to purchase a Life/LTC combo product. : It sounds really good to buy one of these combo products. The sales pitch sounds great in fact. It says, "If you never need long term care, your premiums were never wasted because your beneficiaries get the death benefit." The problem is that your premiums are wasted... they are wasted on a very costly, low-interest, universal life or whole life policy. When you do the math, most of these policies only pay you about 3% per year on your money. If that's all you want to make, then fine... buy one of these policies. I think you'd be better off keeping your money, investing it yourself, and then using a portion of the return on your investment to buy a top notch ltci policy. The universal life policies will often have an "interest rate" of 7% or 8.5%, blah blah blah.... however those interest rates do not take into consideration mortality expenses, policy fees, and all kinds of hidden charges that suck the cash right out of your policy. If you do the math, you're only earning about 3% per year or less. I think that's a bad investment. The only way these combo products would pay well is if you did die suddenly in the first several years.... in that case you make out like a bandit.... : sao

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