Teleconference power of gpq 03-14-12

For Financial Professional/Training Use Only – Not for distribution to the general public.

The Power of

Prudential’s LTC3SM

Guaranteed Purchase

Option

0203375-00002-00

James Zuelsdorf

LTC Regional Sales Manager

March 14, 2012

2 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


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


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.


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?


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


Today and Tomorrow Chronological Age vs. Perspective Age

60 is the new ?

Nominal Value vs. Real Value

$1 today = 20 years from today?

30 years from today?

(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

40

.55

.41

Consider the reducing future

impact of increasing the premium


GPO: The Problems and the Concerns

Increasing cost?

Future affordability?

Inadequate future coverage?

Missed options?

Circumstances change – stop increases?

Uncertainty?

Cumulative cost?


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


Example:

GPO Purchased at Age 40 – NJ* Age Annual

Premium for Both

Monthly Benefit for One

150% HHC for One (monthly)

40% CAB for One (monthly)

Pool for One

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: What did you assume?

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


Delaying the Purchase vs. Continuing the GPO – NJ

Age Annual Premium for Both




Pool for One

61 $ 9,808 $15,000 N/A $6,000 $1,095,000





Pool for One

64 $10,700 $19,351 $29,027 $11,611 $1,412,594

Delay purchase of LTCi until age 61*

-OR- Continue GPO from purchase at age 40**

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


Example:

GPO Purchased at Age 50 – NJ*





Pool for 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


Delaying the Purchase vs. Continuing the GPO – NJ





Pool for One

62 $ 9,977 $10,500 $15,750 $6,300 $766,500

This





Pool for One

68 $10,214 $14,440 $21,660 $8,664 $1,054,091

Delay purchase of LTCi until age 62*

-OR- Continue GPO from purchase at age 50**

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


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


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


Insure or Self-Insure?

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

Age Sample LTCi premium for one insured*

LTC Self- Insurance Fund contribution & compound @ 5% net

Pool of money created by LTCi policy compound @ 5%

Daily cost for nursing facility care

# days covered from LTC “self-insurance” fund

Number of days covered from 6 Yr. LTCi policy

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


Year GPO MMB

150% HHC

POM Premium for 2

1 $6,000 $9,000 $438,000 $2,254

15 $10,775 $16,163 $786,582 $4,318

20 $14,440 $21,660 $1,054,091 $6,508

25 $14,440 $21,660 $1,054,091 $6,508

30 $14,440 $21,660 $1,054,091 $6,508

35 $14,440 $21,660 $1,054,091 $6,508

Year 5% No Max MMB

150% HHC

POM Premium for 2

1 $3,000 $4,500 $219,000 $4,004

15 $5,940 $8,910 $433,598 $4,004

20 $7,581 $11,372 $553,413 $4,004

25 $9,675 $14,513 $706,297 $4,004

30 $12,348 $18,522 $901,426 $4,004

35 $15,760 $23,640 $1,150,473 $4,004

GPO – NJ, started @$200 DBA

GPO vs. Compound Inflation Age 40

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

5% Compound – NJ, started@$100 DBA


Year GPO MMB

150% HHC

POM Premium for 2

1 $6,000 $9,000 $438,000 $2,514

15 $10,775 $16,163 $786,582 $5,738

20 $14,440 $21,660 $1,054,091 $10,214

25 $14,440 $21,660 $1,054,091 $10,214

30 $14,440 $21,660 $1,054,091 $10,214

Year 5% No Max MMB

150% HHC

POM Premium for 2

1 $3,000 $4,500 $219,000 $4,488

15 $5,940 $8,910 $433,598 $4,488

20 $7,581 $11,372 $553,413 $4,488

25 $9,675 $14,513 $706,297 $4,488

30 $12,348 $18,522 $901,426 $4,488

GPO – NJ, started @$200 DBA 5% Compound – NJ, started@$100 DBA

GPO vs. Compound Inflation Age 50

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


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


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


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!


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?


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


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


Meaningful Plan + Manageable Premium

CAB

+

150%HHC

+

GPO

The Unbeatable Combination


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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