|
| |
Welcome ... to
a powerful new way to calculate the economic impact on estate values
with and without insurance.
New insights for financial planners and their
clients are provided in an easily presented package! If you are an
attorney, CPA, financial planner, financial planning firm, or involved
with LTC financial planning in any form, we hope this site is
educational. We believe this software will be invaluable to your practice and your firm.
The entire purpose of the LTC Economic Impact Planning
Model is to
improve the ability of Planning Professionals and others in trusted
advisor positions to help their clients and society at large make more
informed, thoughtful decisions about the economic impact of long term
care with and without the use of insurance.
The model takes a number of key variables into account:
Model Focus
The LTC Economic Impact Planning Model is designed to assist with the
initial and primary decisions a client should address.
-
What will the future cost of care be when
needed, and what effect will that have on family wealth?
- How much of the risk, if any, does the client want to share with an
insurance company, and what benefit design produces the best ratio between
spending personal assets versus insurance benefits?
The LTC Economic Impact Planning Model helps you and your
clients with the primary and most important decisions.
Model Features
Multiple Client Scenarios ... in an instant!
If you want to see the effect of simple inflation rather than compound
inflation, make one change and a new scenario for the same client is created
instantly. Do this with any variable to create as many scenarios as you want to
analyze.
Client Specific Reports
 |
Reports
include annual and cumulative cost for the entire plan period. |
|
Includes
pre-programmed Summary, Line Graph, Bar Chart, Cost of Care, Insurance
Benefits & Cost, and detailed Spreadsheet. |
|
Each
page notes client ID # and advisor information. |
|
Reports for each planning scenario can be generated
with client name, case number and scenario identification. |
|
Reports
can include only basic LTC cost of care, insurance benefits and
insurance premium factors or include one or more advanced planning
variables. |
Advisor Information
|
Advisor
name,
designations, company, phone, fax and e-mail automatically added to each
report. |
Planning Assumptions and
Options
Client Profile
 | Cares about financial and family issues. |
| Concerned about potential erosion of family wealth due to long
term care & other manageable
situations. |
| May have opportunity to use corporate or other federal and state
tax deductions to reduce premium. |
Insurance Assumptions - Standard Benefit Design - Automatic Premium
Calculation
|
All
benefit dollars will be available for care at home, assisted living, or
nursing facilities. |
|
Premiums
calculated by the model are samples but are adequate for this analysis. If
specific carrier quotes are preferred, the user can override the automatic
calculation as desired or use the "Custom Benefit" option. |
|
Premium
mode is lifetime. |
|
"Waiver of Premium" is applicable for all types of care and
starts when benefits start. |
Custom Benefit Design Options
| The custom benefit design option allows the user to input an
almost unlimited choice of design ranges. |
| Example; elimination period can be any number from 0 to 365 and
similar ranges for benefit years, dollars and inflation options. |
| Premium pay years can be all years, one year, limited years or a
specific age, with our without survivor benefit. |
Advanced Planning Options
The advanced planning section gives the planner
the option to include or exclude any of the variables in any of the
client scenarios. The advanced planning scenarios include:
| Loss of Investment Opportunity |
Rate of return that would have been available
on the assets consumed to pay
LTC cost and insurance premiums may be included in your projections.
| Asset Liquidation Expenses |
Depending on individual circumstances, illiquid or
other highly appreciated assets in down markets may have substantial
liquidation costs. Adequate insurance may prevent the need to liquidate
investment and other assets.
| Tax Factors on Premium and Cost of Care |
Tax deductions on premium and care costs will
decrease the economic impact while taxes on appreciated taxable
investments and liquidated qualified retirement funds will be fully or
partially taxed. The model accommodates inclusion or
exclusion of one or more of the tax items.
| Premium Rate Changes or Discounts |
The model also allows you to include actual or
estimated rate changes or premium discounts that would influence premium
cost projections.
Planning Variables
Client Data
| Age |
| Health risk |
| Life expectancy or plan period |
| Joint or single client |
|
Client Social Security # (or other ID# ) |
Cost of Care Data
|
Current daily cost of care |
| Rate of inflation |
| Year care begins |
| Care duration |
Insurance Data
| Deductible days before benefits begin |
| Daily benefit dollars |
| Annual inflation rate applied to benefit dollars starting with
first anniversary of policy issue date |
| Maximum duration of benefit payments |
| Premium pay periods options (custom design) |
| Survivor benefit (custom design) |
| Dual Waiver of Premium (custom design) |
Insurance Premium
Calculation
| Automatic premium calculation using generic policy rates |
| Premium override option if user is working with a specific policy |
| Specific carrier quotes (custom design-planner input) |
Scenario Input
Planner and/or client input creates one or more scenarios
using any of the range of variable choices . Planner may establish
defaults for all variables for individual or two insured clients.
|
Default Example
|
Range
|
| Care Costs |
|
| 1. |
One spouse will need care for 5
years |
1 to 15 years |
| 2. |
The need of care will start at the
beginning of the 16th policy year. |
1 to 50 years |
| 3. |
Surviving spouse will live for the
entire plan period of 30 years. |
5 to 60 years |
| 4. |
The surviving spouse will never
need care. |
Never only |
| 5. |
Current cost of care is $180
per day. |
$80 to $800 |
| 6. |
5% compound inflation
increases the cost annually. |
0% to 10% |
| Standard (generic) Benefit Design |
|
| 7. |
Daily insurance benefit during
the first policy year is $180. |
$50 to $300 |
| 8. |
Insurance benefits should start
after a 90 day deductible period. |
0/30/60/90/180/360 |
| 9. |
Insurance benefits increase 5%
compound annually. |
None/Simple/Compound |
| 10. |
Benefit period unlimited. |
3/4/5/unlimited years |
| Custom Benefit Design |
|
| 11. |
Daily insurance benefit during
the first policy year is $ ___ |
Any dollar amount |
| 12. |
Insurance benefits should start
after a ___ day deductible period. |
Any number to 365days |
| 13. |
Insurance benefits increase
% compound or simple annually. |
0% to 10% |
| 14. |
Benefit period _____ years |
Any number to 100 |
| 15. |
Premium pay periods_______ |
Annual, single premium, limited
years, to age__ |
| 16. |
Survivor benefit (effective at
1st death) |
2nd premium ends |
| Advanced Planning Options |
|
| 17. |
Dual waiver (effective during
care events) |
Both premiums suspended |
| 18. |
Investment return assumption: 6% |
0% to 12% |
| 19. |
Premium tax deduction or credits: |
0% to 80% |
| 20. |
Premium rate increase or decrease |
Any number |
| 21. |
Asset liquidation costs |
0% to 50% |
| 22. |
Care cost tax deduction or
increase |
-50% to + 50% |
Although these parameters are for an insured couple, the model
also accommodates calculations for a single insured.
Total Cost Calculations - Key Projections
|
Total Cost of Care
|
The
data used in the scenario created by the advisor and the client drives the
projected cost of care without insurance. It starts with the current cost of
care inflated to the period of time the care is needed.
The adjustment to the cost of care, if included in data input, either
increases or decreases the projected cost of care due to asset liquidation costs
and either tax deductions or tax increases. If the loss of investment opportunity is included in the
planning variables, the cost of care is increased to reflect the loss of
investment for each year and cumulatively throughout the plan period.
|
Insurance Benefits
|
Similar to the cost of care projections, the total benefit value calculation
works from the annual dollar claims paid that are based on the insurance benefit
design. For example, it the policy has a 90-day elimination period, the first
year benefits reflect the delay and the annual benefit paid the first year is
based on 275 claim days (365-90). If the policy design covers fewer years than
care years the 90 days would carryover so the full dollar amount of benefit
available is reflected in the projected value of the insurance plan. In other
words, the model assumption is that the policy is a “pool of money” product.
The insurance benefit is adjusted to reflect the same “Advanced Planning”
assumptions used in the cost of care assumptions.
|
Total Premium Expenses
|
The total
premium expense, if advanced planning variable are not included, reflects the
accumulation of all annual premiums. If the ”Custom Insurance Design” is
used, the total would reflect the limited pay premium, single premium and
survivor benefit option if included. If
“Advanced Planning” variables are used the total premium will include those
adjustments. Projected premium changes and tax deductions or increases can be
included among the adjustments to total premium expense.
|
Total Self Paid Care Cost
|
Self paid care costs are those insurable costs not covered by the policy design.
Examples include: deductible periods, inflation on care cost greater than the
inflation option selected in the insurance plan, care years greater than benefit
years, and other insurable but self funded care costs.
| Total Estate Consumed With Insurance
|
This is the policyholder's "out of pocket" for
insurable self paid care cost not covered by insurance in this scenario, plus
the economic impact of insurance premium.
|
