Dgoldenz, can you talk a bit about the 10 pay policies? Who offers these? Is there any wiggle room whatsoever for the insurer to raise premiums or cut benefits once you are in a 10 pay policy that will be paid up after 10 years? Can you give a rough idea of the premium differential between a 10 pay and an annual (indefinite) pay policy?
Thanks.
Transamerica, Prudential, Assurity, John Hancock, and Mutual/United of Omaha are all offering them right now. Of those companies, United of Omaha and Transamerica offer a rider to guarantee the rates for the full 10 years. They both guarantee the rates for the first three or five years depending on your state, but you can pay extra to have them guaranteed to your choice of 6, 7, 8, 9 or 10 years. The other companies do not have rate guarantees and can raise your rates at any time, even for a 10-pay. Just as an example:
52 year old couple, both preferred health risks
$200/day benefit or $6k/month benefit
3-year benefit period (total of 6 years of shared benefits)
5% compound inflation
90-day elimination period
0-day elimination period for home healthcare
Survivorship benefit and joint waiver of premium after claims begin
Genworth has by far the lowest rates, but no rate guarantee. For Genworth:
Lifetime pay premium = $3,742
United of Omaha has the lowest rates for a company with a 10-year guarantee available. For UoO:
Lifetime pay premium = $4363
10-pay with standard 5-year guarantee = $12,310
10-pay with 10-year rate guarantee = $13,824
So as you can see, there is a big difference in premium, but this example is also for a younger couple that may live another 40-50 years. So that begs the question....do you feel lucky that they won't raise rates in the future, or are you willing to accept the risk for the lower premium?
Personally, I would take my chances with the lifetime pay premium and survivorship benefit. It is entirely possible that this couple could live to age 65 and then one spouse drops dead of a heart attack. At that point, the remaining spouse would have a policy paid up for life since there were no claims and they'd still likely come out ahead of the 10-pay as long as their rates didn't double or triple. The survivorship benefit can also be reduced to a 7-year timeframe instead of the standard 10 years for about an extra 3% in premium cost.