The Finance of Longevity

Largest LTCi Claim Exceeds $2 Million

Advisors: Why do your clients mistakenly view this protection in ‘investor’ terms?

by Jesse Slome

Mr. Slome is executive director of the American Association for Long-Term Care Insurance (AALTCI).

A single long-term care insurance policyholder claim has exceeded two million dollars (actually $2.6M for a female).  The largest claim still being paid to a male policyholder reached nearly $1.6 million.

Why is this important?  First, it’s the first time we’ve seen a single claim in excess of $2 million.  Second, because consumers mistakenly perceive this protection in ‘investment’ terms … will I get my money back?  Advisors need info like this to tell the story properly!

When it comes to LTC insurance (or most insurance for that matter) some will get NO benefit … some will get SOME benefit … and a few will get HUGE benefit.  By the way, can’t imagine what life is like being on claim for 20 years.

We posted data on the largest claims from five insurers online.  We report the value of the claim paid, how long the claim has been paid, what the policyholder paid for their policy and how long they paid before the claim started.

 

Long-Term Care Insurance Policy Costs – 2018

Based on 2018 American Association for Long-Term Care Insurance annual Price Index survey of leading LTC insurers.

Annual Premium – Average of Leading LTC Insurance Companies
Single Male, Age 55 (Select Health)   $  1,870
Single Frmale, Age 55  $  2,965
Couple, Both Age 55 (cost shown is COMBINED for the couple)  $ 3,000

For Initial pool of benefits equal to $164,000 (each at age 55). Value of benefits when policyholder reaches age 85 equals $386,500 each.

Single Male, Age 60 (Select Health)   $  2,010
Single Frmale, Age 60  $  3,475
Couple, Both Age 60 (cost shown is COMBINED for the couple)  $ 3,490

For Initial pool of benefits equal to $164,000 (each at age 60). Value of benefits when policyholder reaches age 85 equals $333,000 each.

Single Male, Age 65 (Select Health)   $  2,460
Single Frmale, Age 65  $  4,270
Couple, Both Age 65 (cost shown is COMBINED for the couple)  $ 4,675

For Initial pool of benefits equal to $164,000 (each at age 65). Value of benefits when policyholder reaches age 85 equals $287,500 each.

 

Largest Long-Term Care Insurance Claims Paid – Thru December 31, 2017

Based on 2018 American Association for Long-Term Care Insurance survey of leading long-term care insurers.

Largest Claims Paid – Company 1
  FEMALE MALE
Total Value of Claim Paid To Date   $  2.6 Million  $  1.7 Million
Number of Years This Claim Has Been Paid   20 years – 9 months   7 years – 4 months
Time From Policy Purchase to Claim Inception   13 years 9 months   15 years – 4 months
Initial Premium for This Policyholder  $  2,600  $  6,600

Largest Claims Paid – Company 2
  FEMALE MALE
Total Value of Claim Paid To Date   $  2,396,944  $  1,592,332
Number of Years This Claim Has Been Paid   14 years – 4 months   9 years – 10 months
Time From Policy Purchase to Claim Inception   8 years – 1 month   6 years – 6 months
Initial Premium for This Policyholder  $  10,881  $  4,474

Largest Claims Paid – Company 3
  FEMALE MALE
Total Value of Claim Paid To Date   $  1,498,508  $  1,269,894
Number of Years This Claim Has Been Paid   8 years – 10 months   14 years – 0 months
Time From Policy Purchase to Claim Inception   15 years – 1 month   9 years – 5 months
Initial Premium for This Policyholder  $  3,696  $  4,968

Largest Claims Paid – Company 4
  FEMALE MALE
Total Value of Claim Paid To Date   $  1,453,944  $  811,234
Number of Years This Claim Has Been Paid   11 years – 2 months   12 years – 5 months
Time From Policy Purchase to Claim Inception   5 years – 3 months   7 years – 3 months
Initial Premium for This Policyholder  $  3,564  $  4,416

Largest Claims Paid – Company 5
  FEMALE MALE
Total Value of Claim Paid To Date   $  1,440,322  $  1,312,647
Number of Years This Claim Has Been Paid   14 years – 6 months   9 years – 6 months
Time From Policy Purchase to Claim Inception   4 years – 1 month   2 years – 9 months
Initial Premium for This Policyholder  $  1,778  $  3,320

 

Long-Term Care Insurance Tax Deductible Limits – 2018

Tax-qualified LTCi premiums are considered a medical expense. For an individual who itemizes tax deductions, medical expenses are deductible to the extent that they exceed current amount required to meet the individual’s Adjusted Gross Income (AGI). The amount of the LTCi premium treated as a medical expense is limited to the eligible LTCi premiums, as defined by Internal Revenue Code 213(d), based on the age of the insured individual. That portion of the LTCi premium that exceeds the eligible LTCi premium is not included as a medical expense.

Individual taxpayers can treat premiums paid for tax-qualified long-term care insurance for themselves, their spouse or any tax dependents (such as parents) as a personal medical expense.

The Association does not provide tax advice. Speak with your accountant for specific rules and limits that apply.

2018 Long Term Care Insurance Federal Tax Deductible Limits

Taxpayer’s Age At End of Tax Year – Deductible Limit
40 or less   $  420
More than 40 but not more than 50  $  780
More than 50 but not more than 60 $1,560
More than 60 but not more than 70 $4,160
More than 70 $5,200

Source: IRS Revenue Procedure: 2017-58

 

Link to data:  http://www.aaltci.org/long-term-care-insurance/learning-center/ltcfacts.php#largest