I began my career as a long term care insurance advisor with John Hancock in 1998. At the time, John Hancock was the leading provider of stand-alone traditional long term care insurance in the United States.
Traditional LTC insurance policies have no cash value, similar to your health insurance, disability insurance or home owner's insurance polices. These long term care insurance policies are "use it or lose it" propositions. You pay a premium monthly or annually, and if you need to receive long term care, you will collect benefits to help you to stay at home or pay for room and board in assisted living facilities or nursing homes.
John Hancock underwrote individual and large group long term care insurance policies through 2018.
Today, John Hancock no longer sells traditional long term care insurance policies with one exception: John Hancock still sells long term care insurance to the Federal Employees Group Plan.
For everyone else, today John Hancock will only offer long term care benefits through a Long Term Care Rider attached to a life insurance policy.
Below we will review what a Long Term Care Rider is and what your costs will be to purchase the John Hancock life insurance policy with the Rider. We will also compare the John Hancock policy to other long term care options you can consider.
A Long Term Care Rider is an option that you may attach to your life insurance policy for an additional cost. If you purchase a life insurance policy with this optional rider you will be able to accelerate your death benefit to you on a monthly basis to help pay your long term care expenses should you become chronically ill. Any portion of your death benefit that you do not use to pay for long term care will still be passed on to your heirs.
Issue Ages: You are able to purchase this LTC rider if you are between the ages of 20 - 75.
LTC Rider Cost: The cost for the Long Term Care Rider is set at policy issue and is based upon your age and your health, and the benefit amount you elect. While life insurance policy costs can change, the LTC Rider cost can not change.
One Time Elimination Period: Before you are eligible to receive long term care benefits you need to satisfy a 90 day elimination period. Your elimination period is calendar days, and will begin on the day you are determined to be chronically ill.
Long Term Care Benefit Amount: You may elect to purchase up to $50,000 in monthly long term care coverage. Your benefits will be reimbursed to you only up to the amount of monthly receipts you provide for qualified long term care expenses.
Eligibility For Benefits: You will be eligible to receive long term care benefits if you are certified as being chronically ill which is defined as unable to perform 2 of 6 activities of daily living (bathing, eating, dressing, toileting, continence, transferring) without substantial assistance or you are determined to have a severe cognitive impairment (e.g., Alzheimer's, dementia)
Care Settings and Services: Your LTC rider will reimburse you for care expenses provided by licensed and certified care providers in your home, assisted living, nursing facilities and adult day care centers.
Stay At Home Benefits: The LTC Rider will also cover expenses to pay for services and items to help you to stay at home longer such as modifications to your home, durable medical equipment, caregiver training, emergency medical response systems.
Bed Hold Benefits: John Hancock will hold your bed for you for 21 days per calendar year should you need hospital care while you are residing in a facility.
Extension of Benefits: If your life insurance policy lapses while you are receiving care (for example, you fail to pay your life insurance premium) you will continue to receive long term care benefits under the rider until you are discharged from the nursing home or our LTC benefits are exhausted. The life insurance benefit will not be reinstated, however.
Care Advisory Services: John Hancock provides optional long term care referrals, consultation and resources through a 3rd party vendor available to you and your immediate family.
You will determine how much of your life insurance benefit you will want to make available for your long term care expenses. You may select any percentage from 1% to 100%. This is referred to as your Accelerated Benefit Pool.
Most of my clients choose 100%.
Thus, if you purchase a $500,000 life insurance policy you will be able to use up to your entire $500,000 life insurance amount for long term care expenses.
You will also choose your monthly maximum benefit percentage. John Hancock will allow you to accelerate 1%, 2% or 4% of your benefit pool on a monthly basis for long term care expenses.
For example, if you buy a $500,000 life insurance policy and you elect a 2% monthly acceleration percentage (MAP) you will receive up to $10,000 month for long term care.
$500,000 x 2% = $10,000 monthly LTC benefits for 50 months.
Long Term Care Riders on life insurance policies will be one of two types:
Reimbursement LTC Rider: Reimbursement Riders will require you to submit receipts for your qualified care expenses from licensed and certified caregivers to receive reimbursement up to the amount of your receipts.
Cash Indemnity LTC Rider: You receive 100% of your monthly LTC benefit no matter what. Receipts and proof of loss forms are not required to be submitted with indemnity riders.
John Hancock provides a reimbursement LTC Rider. This model offered by John Hancock will not be as flexible for you as the cash indemnity LTC Rider model available through alternative long term care insurance underwriters.
The cash indemnity model will pay out your monthly maximum each and every month. You might have family members providing you care, and taking off work to be able to be there for you. The cash indemnity policy will provide you with 100% of your benefits to use for all of your care expenses as you wish.
The reimbursement model will only allow you to receive benefits up to the amount of your receipts and invoices that you submit for licensed caregiving received.
Cash indemnity LTC Riders are ALWAYS better than reimbursement LTC Riders.
Now, an insurance agent could try to spin this situation to you to make it seem as if a reimbursement rider might be OK.
Here is a common counter to the downside of reimbursement LTC Riders:
"You can stretch your benefits out further with a reimbursement model. What you don't use for care, stays in your pool to be used later or to be paid out as death benefit." While technically a true statement, this viewpoint completely misses the point, however.
If you receive LTC benefits through a cash indemnity policy, the excess unused benefits will stay in your bank account and can be used to stretch out your benefits too, if not needed immediately for care. But more importantly you might have actual long term care expenses (care provided by family members, unlicensed caregivers) that will not be covered as qualified expenses under a reimbursement LTC Rider.
So, the reimbursement model is a disadvantage of the John Hancock LTC Rider.
A second point often overlooked and left unsaid is that when you are receiving long term care benefits under the LTC Rider, life insurance charges will continue and you will still be responsible for your life insurance premium to maintain coverage.
Your life insurance costs of insurance will be based upon the amount of death benefit remaining in your policy.
Internal life insurance costs also increase as you grow older.
If life insurance benefits are being left inside your policy you will still have to continue to pay annual premiums to keep your life insurance in-force.
So, a cash indemnity policy will also help you to potentially reduce your life insurance costs as well.
Once your benefits have been paid out to you, you will no longer be paying life insurance premiums on this amount of benefits.
With the reimbursement model, the insurance company retains your money until you produce receipts for care or a death certificate.
You will continue to have pay life insurance premiums on the benefits that have not been paid out to you.
The reimbursement model is simply a less flexible and a more risky long term care insurance design for you than the cash indemnity policy will be.
To add the long term care rider to your life insurance policy will result in an additional cost to you. For men the additional cost might approximate 8% additional premium to attach the long term care Rider. For women, the cost might approximate 15% additional premium to attach the long term care rider. Long term care benefits are priced higher for women than for men because women are more likely to need care than men. To add the Rider to your life insurance policy is not an exceptional high costs because the amount of your benefit does not change at all. For example, if you are purchasing a $500,000 life insurance policy the net amount at risk to John Hancock is exactly the same, with or without the Rider > $500,000. The only issue for the insurance company is might it have to start accelerating a portion of your $500,000 earlier to you than expected. For this risk of paying your death benefit to you before you die, John Hancock will have to charge you with a higher premium cost.
Ok, this is where the John Hancock Long Term Care Rider option gets very tricky for me.
We know you can do better than the John Hancock reimbursement model by electing an indemnity LTC Rider elsewhere. For this fact alone, I could recommend that you explore your other options.
This issue however is not the biggest negative with the John Hancock Long Term Care Rider.
The biggest negative with electing the John Hancock Long Term Care Rider is with the current John Hancock life insurance policy options! Your biggest risk is within the policy John Hancock is attaching your rider to .> > its life insurance contract!
Yes, you read this correctly. John Hancock is no longer selling any life insurance contracts that are guaranteed for life to not lapse without value.
Almost every other life insurance company will provide you with a Lifetime no-lapse guarantee on your contract. John Hancock will not.
Today, John Hancock markets universal life insurance policies with typical guarantees only to mortality age such as age 77-84.
Universal life insurance are flexible premium adjustable life contracts that allow you the ability to fund the policy with a "Planned Premium." The amount of your Planned Premium will determine at what age your policy is guaranteed until.
There will be other factors inside your illustration as well.
You will see assumed interest rates credited to your contract which can be changed at any time by John Hancock.
Your contract will also have assumed life insurance costs of insurance which can also be changed by John Hancock at any time.
The only part of the contract you can control is your premium and the guarantee that it buys you.
With John Hancock you will not be able to buy your lifetime guarantee. For any premium.
So, if you are thinking about attaching a long term care rider to your life insurance contract, and if you are aware that your risk of death or your risk of needing care is most likely when you are in your 80s', do you want to buy a life insurance policy that is not guaranteed to stay in force when you are likely to die or to need care?
I don't know about you, but I would never buy a life insurance policy unless it was guaranteed for life. What is the point? I must not plan upon living very long. And for long term care planning I would have to be insane to pay more money to attach an LTC Rider to a life insurance policy that might only have death benefit guarantees to late 70's or early 80's.
Here are 2 sample illustrations for the John Hancock policy. Male age 45 and Female age 45, each in Preferred health.
These illustrations are for life insurance benefits of $500,000 and a long term care rider of $10,000 month.
You will see the guaranteed elements on pages 25-27. These illustrations are guaranteed to stay in-force only until age 83 (male) and 87(female).. Basically a coin flip if any benefits will ever be paid.
These universal life insurance policies that John Hancock is currently marketizing will only stay in-force for life based upon current life insurance chares not being changed by John Hancock, and an assumed non-guaranteed high crediting interest rate also materializing on an annual basis.
Bottom line: John Hancock has shifted the interest rate risk and the longevity risk entirely to you.
And if you think for a second that insurance companies will not increase cost of insurance charges inside policies to force a lapse and increase shareholder profits then you might want to read about the class action lawsuits against John Hancock in the state of NY.
The lawsuit alleged John Hancock “admits” the increase was “driven” by the carriers’ goal to raise or meet its “profit objectives,” which is “not one of the enumerated factors a COI rate increase can be based on.”
This lawsuit was just settled by John Hancock in January 2022 for $123 million.
Just. Not. Good.
So, my best advice for you is if you want to consider long term care planning and if you are mostly concerned with leaving a death benefit to your heirs, attach a long term care rider to a life insurance policy that is 100% guaranteed for life!
This is your first action item. Lifetime Guaranteed No Lapse Life Insurance Policy.
Once you have this life insurance policy available, you will have my blessing to attach a Long Term Care Rider to it.
Possibly one day John Hancock will offer no-lapse lifetime guarantees on its policies again. Hope so.
Most consumers, if working with an independent agent, will be presented generally with policies through insurance companies that will be guaranteed for life. I can't imagine an agent in the brokerage arena recommending a policy for long term care planning that could lapse entirely without value?
The biggest risk to be presented this John Hancock policy will be if you are a USAA member. USAA has a long-standing marketing agreement to sell John Hancock insurance policies for over 25 years. If you are a USAA member, you will be presented the John Hancock universal life insurance policy with long term care rider if you ask for a long term care policy. This policy will be the only option USAA can show you. So, keep this in mind if you are with USAA. I am sure you might trust USAA and use your membership in many ways. Unfortunately, for long term care planning the only LTC insurance option USAA can provide for you is not without flaws.
You may want to consider a long term care rider on a life insurance policy if you are primarily concerned about providing a legacy for your heirs in the form of life insurance. For a small additional premium cost of 8%-15% you may attach a long term care rider to your life insurance policy. Depending upon company, your LTC rider might be a cash indemnity rider or a reimbursement rider. Cash indemnity is always better. Most importantly however, you will want to know that your life insurance is guaranteed for life. If you are driving on a cross country road trip I am sure you would want to have access to unlimited gasoline. In the same respects, if you are buying a life insurance policy, you will want to know that your coverage isn't gong to run out too soon. Once you know that your coverage is guaranteed forever, consider adding your LTC Rider to your policy.
To receive free long term care insurance quotes with no obligation, please contact me. Or you may complete my online quote request form and I will reply shortly. Receive unbiased and objective advice. I have been helping my clients with long term care planning for 25 years. To receive comparisons of your best options form all of the leading underwriters including Mutual of Omaha, Lincoln Moneyguard, OneAmerica, Nationwide, Securian, MassMutual, Brighthouse, National Guardian, Thrivent, Pacific Life and more please get in touch with me today directly at (800) 891-5824.