Protection Products

Finding the Funding for Long-Term Care (LTC)



Finding the Funding for Long-Term Care (LTC)

You’ve identified a client and had the conversation. You know your client would benefit from a funding[CT1] plan for long-term care and is ready to get started. Now what?

In recent years, more and more long-term care solutions have become available. And while they offer a lot of flexibility, the choices can seem overwhelming. Fortunately, your Ash LTC team is here to help you understand what the products do, and how to design a plan for your client.


Are linked benefits the solution?

Linked benefit products have taken a prominent role[CT2] when it comes to LTC planning. And while they won’t be the answer for every client, it’s worth having a basic knowledge of how they work, and what goals they can help your clients reach.


Let’s look at a case study to see how where a linked benefit product might be a good fit.

Suzie and Tom are active 60-year-olds who take good care of themselves. They do not expect to need LTC and have not been impressed with what they’ve heard about traditional long-term care insurance However, they’d like to leave an estate for their three grandchildren and recognize that an LTC event could destroy their financial legacy. When they discussed their concern with their advisor, she suggested linked benefit policies. They can each purchase a policy that starts paying benefits when the insured needs LTC or dies, whichever occurs first.

The advisor helped Tom and Suzie design their policies to:

  • Pay a death benefit of $150,000, leaving each grandchild $50,000 if the policy isn’t used for LTC.
  • Provide about 200 hours of custodial or home care each month, if LTC is needed. It would cover most of the average cost of care in an assisted living facility, and more than half the average cost of care in a nursing facility. Tom and Suzie’s income and other assets can complement the policies, because if they do need to go to a facility, their food, housing and transportation costs would be greatly reduced.
  • Increase by 3% compound each year to help offset inflation. The longer Tom or Suzie wait to access their policy, the larger the available LTC benefits[CT3]. 
  • Provide seven years of LTC benefits (or even longer, if the full benefit is not used each month[CT4]). For a claim starting at age 80 (20 years after the policies were purchased), each policy could pay about $700,000 in LTC benefits. For a claim starting at age 85, however, it could pay upwards of $800,000[CT5].
  • Include a residual death benefit, allowing them to leave a small gift to each grandchild even if the policy is needed for LTC.


In essence, this strategy uses the death benefit that would be paid to their grandchildren to help “self-fund” the first two to three years of long-term care. The insurance should cover at least a substantial portion of LTC costs thereafter, until the coverage runs out. Naturally, the cost of this insurance depends on gender, health, resident state, when the policy is purchased, etc.


If your clients are interested in leaving a legacy but are concerned that an LTC event might make that impossible, let us know. Your Ash LTC team is here to help you design a plan, find the funding and exceed your clients’ expectations.

Just Ask!

 [CT1]A plan for LTC does not necessarily involve insurance.  Insurance is a funding mechanism

 [CT2]“Front seat” seems to overstate as more stand-alone policies are still sold than linked benefit

 [CT3]Moved up to highlight more and mentioned inflationary consideration

 [CT4]Just checking as to whether we are typically quoting 7 years now.

 [CT5]Moved up with the 7 year comment and changed “would” to “could”. 

John Hancock Long-Term Care Rate Increases


In December, John Hancock will begin petitioning State Departments of Insurance for in-force long term (LTC) care rate increases.

John Hancock anticipates an average increase of approximately 30% across most of its LTC business. The approval process could be as short as six months, or take as long as a couple of years. The increases will only be implemented in a particular state once they are permitted to do so.

John Hancock plans to offer benefit adjustment options to help insureds mitigate the impact of the rate increase. We anticipate plans to offer at least two premium neutral options: the shared cost option and reduced inflation landing spots.

Many of you have already dealt with LTC in-force premium increases. You understand the strain and confusion a premium change can bring to your clients. Ash Brokerage can help. We can provide the resources to help evaluate the options presented to your clients. There are many factors that should be taken into consideration before a decision is finalized.

  • What is the current age of your client
  • What is their current benefit level
  • What policy benefits do they currently have?

John Hancock will offer a limited number of options, but you may find additional options by contacting John Hancock directly.

The Ash Brokerage LTC team is prepared to help you and your client navigate the increase options. When the notification arrives, please let us help answer the questions and evaluate the options. Contact the Ash LTC team for help.

Principle-Based Reserving and 2017 CSO


Effective Jan 1, 2017, state insurance commissioners agreed to make two significant changes to the way carriers are required to price and reserve for life insurance products.

While these changes were technically effective in 2017, states provided insurance companies three years to comply, or until Jan. 1, 2020. As is often the case, insurance companies have delayed implementation to maximize the benefits of the current regulatory framework, but now the time to make changes is arriving.

For the remainder of 2019, there will be a flurry of product reprices as carriers scramble to comply with these new guidelines by the end of the year. Before we can understand what’s to come, let’s dive into what is changing and what it means to you.


Principle-Based Reserving

As insurance products have evolved over the last several decades, the regulatory framework for proper reserving has often lagged. Universal life products and universal life with “secondary guarantees” have grown significantly in market share over the last few decades and this has challenged regulators to create a framework to ensure policy promises are sound and secure. Principle-based reserving (PBR) is the latest attempt to ensure that carriers are adequately capitalized on the insurance business they are putting in place. Specific to the rationale for PBR, the National Association of Insurance Commissioners (NAIC) stated the following:

PBR is a significant change in underlying laws and regulations to solve a problem created by our current regulatory framework. The issue lies with laws and guidance on how a life insurer is required to book its reserves. Insurers set aside funds, known as reserves, to pay insurance claims when they become due.

Prior to PBR, static formulas and assumptions were used to determine these reserves as prescribed by state laws and regulations. However, sometimes this rule-based approach leaves an insurer with excessive reserves for certain insurance products and inadequate reserves for others. The solution is to "right-size" reserve calculations by replacing a rule-based approach with a principle-based approach.

The overall pricing impact of PBR changes have appeared to be relatively minimal. The carriers that have already released pricing on 2020 compliant products have made relatively small tweaks to pricing, with modest cost reductions in some areas and increases in others. Technically speaking, the PBR changes are not requiring the carriers to reprice their products but will be a significant factor in how they price products today and beyond.

2017 Commissioners Standard Ordinary Table (CSO)

When carriers are pricing product and regulators are setting reserve requirements, mortality assumptions must be made based on a standard. These mortality tables are updated periodically. The last update was the adoption of the 2001 CSO. For policies effective in 2020 and beyond, the NAIC will require carriers to comply with the 2017 CSO. The 2017 CSO will reflect a more robust data set for mortality and will generally reflect overall increases in life expectancy. The new mortality tables will certainly play into the PBR discussion as it relates to the way in which companies reserve for policies. Furthermore, the major impact of the 2017 CSO adoption is that all products must be repriced to comply with the 2017 CSO rather than the current 2001 CSO.

MEC Limitations

As the 2017 CSO is adopted, it will have notable pricing and product performance impact on Modified Endowment Contract (MEC) limitations. Every insurance contract has a methodology to comply with Internal Revenue Code Sections 7702 and 7702A, which, among other things, determines how much premium can be paid into a contract without creating a MEC. The calculations for compliance with these tests are based on mortality assumptions. Shorter mortality assumptions allow for a higher non-MEC premium, while longer assumptions allow lower non-MEC premiums. When carriers adopt the 2017 CSO, life expectancy assumptions will be generally longer, which will lower the amount of premium that can be paid into a contract without creating a MEC.

To use an overly simplified example, a 50-year-old male acquiring $1,000,000 of coverage in a product on the old mortality tables could fund a policy with an annual premium of approximately $56,000 for a period of seven years. On the new mortality tables, that same client would be limited to funding his policy with only about $47,000 annually over seven years. Because the non-MEC funding level will be less, the net amount at risk in the contract will increase and cash accumulation products will likely be adversely affected. It remains to be seen if carriers will be able to offer lower cost of insurance charges or other value to offset this impact.

Moving Forward

Because all non-compliant policies must be placed no later than Dec. 31, 2019, carriers will be rolling out new product pricing throughout the year. Many carriers are waiting as long as possible to make this transition and are not disclosing their pricing until the transition period. There could also be additional repricing in early 2020 for carriers to maintain their competitive positioning relative to peers.

Producers should be aware of product pricing changes, transition deadlines and new pricing impacts on any active cases. There will certainly be some clients that will significantly benefit from the old pricing, which may not last much longer. This is especially true for those considering a cash accumulation policy funded to the MEC limit.

Key Takeaways

  • Many current policies will be repriced with placement deadlines of Dec. 31, 2019.
  • Cash accumulation policies will have lower non-MEC premium limits, potentially reducing efficiency.
  • Watch for communication regarding transition deadlines and to get clients to act to lock in the best value.

PBR CSO 2017 MEC Principle-Based Reserving Life Insurance Pricing

Prudential Moves to e-Delivery


We’re making it easier to get your clients' policy faster. Starting with applications submitted on July 1, we will require eligible* Prudential policies written through Ash Brokerage to use e-Delivery. 

Unlike delivery through PDF, Prudential uses a true e-Delivery system, using DocFast to collect signatures. We've piloted it for a year — and the process works. Once you've reviewed and electronically signed the app, your client receives a link to review and electronically sign. 

It's better for you — ensuring an accurate and efficient delivery. More importantly, it's better for your clients — with a cycle time up to nine days faster.  Your case manager will make sure you have the details when an app comes in, but here's what you should know:

  • Complete the Prudential e-Consent form (ORD 115309) in your application packet
  • If you submit an eligible application without this form, or if the form is incomplete, the form can be submitted any time prior to the policy being issued
  • The insured will need to answer "yes" to e-Delivery when completing the telephone interview or express worksheet

Questions? Ash Answers — reach out to your case manager at (800) 589-3000 for details. And by the way, Ash Brokerage has already saved 36 trees this year by switching to e-delivery! 

*E-delivery is only available on for single, individual-owned policies. Other exclusions include replacement policies in New York or Illinois, survivorship policies or policies issued on juveniles. Ask your case manager for more.

Go Digital. Get More.

Prudential joins several other carriers that have already streamlined the insurance delivery business. By using our full offering of electronic tools, you’ll:

Check!   Reduce your overhead costs
No printing or mailing required

Check!   Allow clients to engage on their terms
Take delivery on the go

Check!   Improve cycle times and placement ratios
Close more cases and get your commissions faster

Commitment to Service

I promise you this: A computer will never replace our care and commitment to you. We’re here to help you build your business and protect your clients’ lives. Because whatever the question, whatever the need, Ash Answers.


The Risks of Waiting for DI Coverage


I don’t know about you, but I’m a master procrastinator! If it can wait, then chances are good that I’m pushing it off. The fact is, it’s possible your clients are procrastinators too. Often, it’s not that they mean to be – life happens. Things come up. But if they wait too long to get disability insurance, they’re putting a lot at risk.

Aside from the risk of becoming ill or injured, a lot could happen to your clients:

  1. Longevity – they older they are, the higher their premiums will be
  2. Their occupation could change, resulting in higher premiums or declined coverage
  3. Their health could change – certain conditions could also result in higher premiums or declined coverage

The best time to buy disability insurance is when a person is young and healthy. However, most often, people don’t think about it until something has changed with their medical history – by then it might be too late. It’s up to you to plant the seed early by showing your clients why they need coverage.

Ask Questions – Today

Don’t wait. Here are some questions to ask at your next client meeting:

  • How would your family be impacted if something were to happen to you today, and you were no longer able to work?
  • Do you know anyone who has suffered a disability? If so, how did they make it through financially?

See It ThroughYour clients worked hard to build their financial future (and so did you). But once it’s gone, it’s too late. It’s our job to make sure that everything works when your clients can’t. To make sure their foundation is protected.

Don’t end the conversation before checking the last box. Check out these resources to SEE IT THROUGH – to create a solid financial foundation for paychecks, made possible.

Sign Up Now  


About the Author


Meghan Cormany, DIA, DIF
Sales Development Specialist - DI
Office: (260) 478-0674
Cell: (260) 417-9638

Schedule a Call

Meghan Cormany helps advisors add value and protection for their clients through disability insurance. As a sales development specialist, she provides sales concepts, training and solutions to help integrate DI into existing planning conversations. Meghan has been an integral part of the Ash DI team since 2008 and is a leader in disability sales.