Teleconference power of gpq 03-14-12

The Power of
Prudential’s LTC3SM
Guaranteed Purchase
Option

James Zuelsdorf
LTC Regional Sales Manager
March 14, 2012
0203375-00002-00
For Financial Professional/Training Use Only – Not for distribution to the general public.

Objective

To help you help your
clients protect their
retirement plans while
making long-term care
insurance affordable
when they’re eligible

2

Agenda
 Understanding the LTC3SM Guaranteed
Purchase Option (GPO)
 Learn how purchasing a long-term care
(LTC) insurance policy with GPO at ages 40
and 50 compares to:
• purchasing at age 62
• other inflation protection options
• self-insuring
 Summary of GPO benefits
3

Discussion Points
 Medical advances = Longevity = Extended care
 Extended care = $ + Family + a written plan

 Do you know anyone who has received extended care?
 Where are the dollars coming from?
 Where would you want to receive care?
 Who would be part of the care?

What’s your written plan for care?
 Planning = Discussion Product = Debate
The greatest threat to the most well thought out and executed retirement plan is not dying.

4

Obstacles to Extended Care
Planning
 Eligibility
 Affordability
 Complexity
(the more you know the less you need to say)
 Availability

 The more you know
Avoid? Assume? Transfer?

5

Expand Your Markets

Maximize Health and Wealth


The Market Opportunity:
40s and 50s
 Allows for more robust plans
 Today’s Life styles
 Personal experiences
 Government messages
 Firewall for your retirement plan
 When is the time to protect your plans?

Protect wealth when you are building wealth

7

Today and Tomorrow
 Chronological Age vs. Perspective Age
60 is the new ? 40

 Nominal Value vs. Real Value
Consider the
$1 today = 20 years from today? .55
reducing future
30 years from today? .41 impact of increasing
the premium
(Assuming a 3% inflation rate)
Today: Nominal Value = $4,000, Real Value = $4,000
In 20 years: Nominal Value = $4,000, Real value = $2,214
In 30 years: Nominal Value = $4,000, Real Value = $1,647

8

GPO: The Problems and the
Concerns
 Increasing cost?
 Future affordability?
 Inadequate future coverage?
 Missed options?
 Circumstances change – stop increases?
 Uncertainty?
 Cumulative cost?
9

Guaranteed Purchase Option (GPO)
Features
 Increase offers are made every three years – producers will be paid first-year
commissions on these increases
 Daily Benefit will increase by 5% compound for the previous three years on each
policy anniversary date
 No limit to the number of times client declines the increase
 No evidence of insurability is required
 Increases continue even while on claim
 Can be upgraded to any automatic inflation option on a one-time, guaranteed-
issue basis at attained age premiums on a policy anniversary
Benefits
 Reassurance: client is always guaranteed to acquire additional coverage
 Control: client always receives advance notice of each proposed benefit increase
and always has the ability to decline in writing
 Continuity: declining an increase offer does not affect future increase offers

10

Example:
GPO Purchased at Age 40 – NJ*
Age Annual Monthly 150% HHC 40% CAB for Pool for One
Premium Benefit for for One One
for Both One (monthly) (monthly)
40 $2,255 $6,000 $9,000 $3,600 $438,000
43 $2,632 $6,946 $10,419 $4,168 $507,051
46 $3,076 $8,041 $12,062 $4,825 $586,964
49 $3,616 $9,308 $13,962 $5,585 $679,491
52 $4,318 $10,775 $16,163 $6,465 $786,582
55 $5,258 $12,474 $18,711 $7,484 $910,580
58 $6,508 $14,440 $21,660 $8,666 $1,054,091
61 $8,214 $16,716 $25,074 $10,030 $1,220,246
Compare to: Ages 61/61, Standard I, $500 DBA, 100% HHC ($15,000 monthly), Premium = $9,808
19% more in premium:
*NJ rates – Age 40, Preferred, 30% Spouse Discount , $200 DBA, 6YR BP, 150% HHC, 90-Day EP, Monthly, GPO,
Shared Care Benefit What did you assume?
11

Delaying the Purchase vs.
Continuing the GPO – NJ
Delay purchase of LTCi until age 61*
Age Annual Monthly 150% HHC 40% CAB Pool for
Premium Benefit for for One for One One
61 $ 9,808 $15,000 N/A $6,000 $1,095,000

-OR-
Continue GPO from purchase at age 40**
64 $10,700 $19,351 $29,027 $11,611 $1,412,594

*NJ rates – Age 61, Standard I, 30% Spouse Discount , $500 DBA, 6YR BP, 100% HHC, 90-Day EP, Monthly, GPO, Shared Care Benefit
**NJ rates – Age 40, Preferred, 30% Spouse Discount , $200 DBA, 6YR BP, 150% HHC, 90-Day EP, Monthly, GPO, Shared Care Benefit

12

Example:
GPO Purchased at Age 50 – NJ*
Age Annual Monthly 150% HHC 40% CAB for Pool for One
Premium Benefit for for One One
50 $2,614 $6,000 $9,000 $3,600 $438,000
53 $3,094 $6,946 $10,419 $4,168 $507,051
56 $3,716 $8,041 $12,062 $4,825 $586,964
59 $4,550 $9,308 $13,962 $5,585 $679,491
62 $5,738 $10,775 $16,163 $6,465 $786,582

Compare to: Ages 62/62, Standard I, $350 DBA ($10,500 monthly), 150% HHC ($15,750 monthly), Premium = $9,977

73% more in premium: What did you assume?
*NJ rates – Age 50, Preferred, 30% Spouse Discount , $200 DBA, 6YR BP, 150% HHC, 90-Day EP, Monthly, GPO, Shared Care Benefit

13

Delaying the Purchase vs.
Continuing the GPO – NJ
Delay purchase of LTCi until age 62*
62 $ 9,977 $10,500 $15,750 $6,300 $766,500

-OR-
Continue GPO from purchase at age 50**
68 $10,214 $14,440 $21,660 $8,664 $1,054,091
This

*NJ rates – Age 62, Standard, 30% Spouse Discount , $350 DBA, 6YR BP, 150% HHC, 90-Day EP, Monthly, GPO, Shared Care Benefit
**NJ rates – Age 50, Preferred, 30% Spouse Discount , $200 DBA, 6YR BP, 150% HHC, 90-Day EP, Monthly, GPO, Shared Care Benefit

14

Plan Designs – Age 40/40

Example: Annual Premium Comparison*
Plan A: GPO $2,225
Plan B: 5% Compound 2X Max $3,604
Plan C: 5% Compound No Max $8,008

*New Jersey, Age 40/40, 6 Yr. BP, 90-Day EP, $200 DBA, 150% HHC, Preferred, 2-
Spouse Discount, Monthly, Shared Care Benefit – In year 26, GPO premiums paid
will exceed 5% compound premiums paid

15

Plan Designs – Age 50/50

Example: Annual Premium Comparison*
Plan A: GPO $2,614
Plan B: 5% Compound 2X Max $4,847
Plan C: 5% Compound No Max $8,976

*New Jersey, Age 50/50, 6 Yr. BP, 90-Day EP, $200 DBA, 150% HHC, Preferred, 2-
Spouse Discount, Monthly, Shared Care Benefit – In year 22, GPO premiums paid
will exceed 5% compound premiums paid

16

Insure or Self-Insure?

Age Sample LTCi LTC Self- Pool of money Daily cost # days Number of
premium for Insurance created by LTCi for nursing covered from days covered
one insured* Fund policy facility LTC “self- from 6 Yr.
contribution compound @ care insurance” LTCi policy
& compound 5% fund
@ 5% net
40 $1,127 $935 $438,000 $200 5 2,190
45 $1,316 $6,855 $507,051 $255 27 1,986
50 $1,808 $16,257 $679,491 $326 50 2,086
55 $2,629 $30,683 $910,580 $416 74 2,190
60 $3,254 $52,848 $1,054,91 $531 100 1,986

* NJ, 90-Day EP, $200 DBA, 150% HHC, GPO, 6 Yr. BP, 2-Spouse Discount, Preferred, Monthly, Shared Care Benefit

17

GPO vs. Compound Inflation
Age 40
GPO – NJ, started @$200 DBA 5% Compound – NJ, started@$100 DBA

Year GPO 150% POM Premium Year 5% No 150% POM Premium
for 2 for 2
MMB HHC Max MMB HHC
1 $6,000 $9,000 $438,000 $2,254 1 $3,000 $4,500 $219,000 $4,004

15 $10,775 $16,163 $786,582 $4,318 15 $5,940 $8,910 $433,598 $4,004

20 $14,440 $21,660 $1,054,091 $6,508 20 $7,581 $11,372 $553,413 $4,004

25 $14,440 $21,660 $1,054,091 $6,508 25 $9,675 $14,513 $706,297 $4,004

30 $14,440 $21,660 $1,054,091 $6,508 30 $12,348 $18,522 $901,426 $4,004

35 $14,440 $21,660 $1,054,091 $6,508 35 $15,760 $23,640 $1,150,473 $4,004

GPO: starts at twice Compound – Premium increases every 3 years, assume stop exercising option in future
5% Compound No Max: Coverage increases each year – Premium remains constant

Assumptions: Age 40, H/W Preferred, 6 Yr. BP, 90-Day EP, 150%HHC, 2-Spouse Discount, Monthly, Shared Care Benefit

18

GPO vs. Compound Inflation
Age 50
GPO – NJ, started @$200 DBA 5% Compound – NJ, started@$100 DBA

Year GPO 150% POM Premium Year 5% No 150% POM Premium
for 2 for 2
MMB HHC Max MMB HHC
1 $6,000 $9,000 $438,000 $2,514 1 $3,000 $4,500 $219,000 $4,488

15 $10,775 $16,163 $786,582 $5,738 15 $5,940 $8,910 $433,598 $4,488

20 $14,440 $21,660 $1,054,091 $10,214 20 $7,581 $11,372 $553,413 $4,488

25 $14,440 $21,660 $1,054,091 $10,214 25 $9,675 $14,513 $706,297 $4,488

30 $14,440 $21,660 $1,054,091 $10,214 30 $12,348 $18,522 $901,426 $4,488

GPO: starts at twice Compound – Premium increases every 3 years, assume stop exercising option in future
5% Compound No Max: Coverage increases each year – Premium remains constant

Assumptions: Age 50, H/W Preferred, 6 Yr. BP, 90-Day EP, 150%HHC, 2-Spouse Discount, Monthly, Shared Care Benefit

19

GPO: The Problems, the Concerns,
and Now… the Solutions
 Increasing cost? Human Capital, Nominal Value vs. Real Value
 Future affordability? Human capital, stop exercising options at 61 or
62, and you have a very significant benefit for today and for tomorrow
 Inadequate future coverage? The 150% HHC handles that now and
later – Home Care is the focus now and later
 Missed options? Negative elections (no action needed)
 Circumstances change? Change inflation option without evidence of
insurability, skip options = Flexibility
 Uncertainty? GPO provides certainty
 Cumulative cost? See next slide and get ready to be surprised

20

Cumulative Cost: The Real Story
GPO vs. 5% Compound No Max

 NJ age 40/40 – can exercise options through age 64, (25 years) and
cumulative cost is less
 NJ age 50/50 – can exercise options through age 70, (21 years) and
cumulative cost is less

Assumptions: $200 DBA, 150% HHC, 6 Yr. BP, 90-Day EP, Monthly, 2-Spouse Discount,
Preferred, Shared Care Benefit

21

Another GPO Thought/Opportunity
Shared Care can now be issued with GPO!
In age 60 range: Plan Design thought
 Shared Care + GPO = Plan A
-or-
 Shared Care + Simple or Compound Inflation = Plan B

More thoughts:
 Buy more now for less options later
 The sequential sale

Plan A with GPO eliminates the affordable objection!
22

Consequences of Transferring the
Risk vs. Assuming the Risk
 Early years – client doesn’t purchase because of cost
(assumption and hope: they did not require care in their 40s
or 50s)
 Later years
• Client doesn’t purchase because of cost
• Potential for one of two or both to be rated or uninsurable
 Impact on Retirement plan, Estate Plan, Investment plan,
Tax plan, “Life Plan:” a possible lifetime of planning in chaos
 Emotional and physical impact on family: immeasurable
An affordable plan established through the planning years and maintained through the retirement
years would have avoided the inevitable consequences of needing care and not having a funded plan.
Small financial investment vs. financial burden – which one could your client and their family live with?

23

The Power of GPO
Eligibility, Affordability, Availability
 Affordable premiums during working years

 Getting the best classification clients will ever get and keeping the
best classification they will ever get

 GPO offers continue on claim

 Premium is waived while on claim

 Prior offer declines do not affect future offers

 One-time option to change to another inflation option
24

The Power of GPO
Eligibility, Affordability, Availability
 GPO offers are calculated on a 5% compound basis

 Meaningful benefit for a manageable premium from the beginning

 Human Capital during working years allows for exercising options

 Can be related to disability – dependence on ADL assistance and
cognitive supervision could extend into retirement years

 Long-term care is a pillar of any retirement plan

 Affordable premiums in retirement
25

Meaningful Plan + Manageable
Premium
CAB
+
150%HHC
+
GPO

The Unbeatable Combination
26

LTC3SM long-term care insurance policy is issued by The Prudential Insurance Company of America, 751 Broad Street,
Newark, NJ 07102 (800-732-0416). This coverage contains benefits, exclusions, limitations, eligibility requirements
and specific terms and provisions under which the insurance coverage may be continued in force or discontinued.
Prudential is authorized to conduct business in all U.S. states and the District of Columbia. Product availability varies
by state. Coverage is issued under policy number GRP 113096; however, policy numbers may vary by state.


Teleconference power of gpq 03-14-12

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