OneAmerica / State Life Hybrid Life Long Term Care Insurance Plan Review

Introduction to OneAmerica and State Life Insurance Company

OneAmerica Financial Partners is an insurance and financial services organization headquartered in Indianapolis, Indiana. While not as widely known to the general public as some of the larger insurance brands, OneAmerica has a long and distinguished history dating back to 1877. The company operates through several subsidiary insurance companies, the most notable of which for hybrid long-term care insurance purposes is the State Life Insurance Company of Indiana.

State Life Insurance Company has been issuing life insurance and annuity products for well over a century. Through this subsidiary, OneAmerica offers its Asset-Care product line, which has become one of the most well-regarded hybrid long-term care insurance options in the market. What makes OneAmerica particularly notable is that they have been in the long-term care insurance business for decades and have committed to remaining in this space while many competitors have exited.

OneAmerica's dedication to the long-term care insurance market is significant. While many large insurance companies have retreated from LTC coverage altogether, OneAmerica has continued to innovate and expand its Asset-Care product line. This commitment gives advisors and consumers confidence that the company understands the long-term care space and is invested in serving this market for the foreseeable future.

The Asset-Care Product Line: An Overview

OneAmerica's Asset-Care is a family of hybrid long-term care insurance products that offers something few competitors can match: both annuity-based and life insurance-based options under a single product umbrella. This dual approach gives consumers and their financial advisors considerable flexibility in designing a plan that aligns with the client's specific financial situation, tax considerations, and coverage goals.

The fundamental concept behind Asset-Care is the repositioning of existing assets. Many Americans have money sitting in bank savings accounts, certificates of deposit, money market funds, or other low-yielding vehicles. These assets may be earmarked for "emergencies" or "just in case" but are not generating meaningful returns. Asset-Care allows policyholders to reposition these funds into a product that provides substantial long-term care benefits, a death benefit or annuity value, and in many cases a return-of-premium guarantee if plans change.

Asset-Care (Life Insurance Based)

The life insurance version of Asset-Care uses a whole life or universal life insurance chassis to provide both a death benefit and long-term care coverage. The policyholder pays premiums (either a single lump sum or over a scheduled payment period), and in return receives a life insurance policy with an accelerated death benefit for long-term care and an extension of benefits rider. Key features include:

• Death benefit protection: If long-term care is never needed, the full death benefit passes to beneficiaries income-tax-free, ensuring premiums are not lost.
• Accelerated death benefit for LTC: The policyholder can draw down the death benefit to pay for qualifying long-term care expenses, including nursing home care, assisted living, home health care, and adult day care.
• Extension of benefits: After the death benefit is exhausted for LTC expenses, the extension of benefits rider continues to pay for care, often doubling or tripling the total amount of long-term care coverage available.
• Inflation protection options: Various inflation protection riders are available, including compound and simple benefit increases, to help the LTC benefit keep pace with rising care costs over time.
• Return of premium: The policyholder can request a return of their premium (less any benefits paid) if they decide they no longer want the coverage, providing an important safety net.

Asset-Care (Annuity Based)

The annuity-based version of Asset-Care is particularly innovative and serves a market segment that many hybrid LTC products overlook. Instead of life insurance, this product uses a fixed annuity as its foundation. This approach has several unique advantages:

• Tax-favored repositioning: Consumers who have existing non-qualified annuities can use a 1035 exchange to move funds into an Asset-Care annuity without triggering a taxable event. This is especially valuable for individuals sitting on annuities with significant deferred gains.
• No life insurance underwriting: Because the annuity version is not a life insurance product, the underwriting is generally focused on long-term care eligibility rather than mortality risk. This can make it easier for some individuals to qualify, particularly those who might be declined for life insurance due to health issues but are still functionally capable.
• Guaranteed interest rates: The underlying annuity earns a guaranteed minimum interest rate, providing steady, predictable growth of the account value.
• LTC benefits that leverage the annuity value: The long-term care benefit is a multiple of the annuity account value, meaning the policyholder receives significantly more in LTC benefits than the premium deposited.
• Annuity value as fallback: If long-term care is never needed, the annuity value remains available as a financial asset that can be annuitized for income, withdrawn, or passed to beneficiaries.

Joint Coverage for Couples: A Standout Feature

One of OneAmerica's most distinctive competitive advantages is the joint coverage option available within Asset-Care. Long-term care is a concern for both members of a couple, and the joint Asset-Care product addresses this need in an efficient and cost-effective manner.

With joint Asset-Care, a single policy covers both spouses or domestic partners. The key benefits of joint coverage include:

• Shared pool of benefits: Both insured individuals draw from a single, shared pool of long-term care benefits. This is advantageous because it provides flexibility in how benefits are used. If one spouse needs extensive care and the other does not, the spouse with greater needs can access a larger share of the total benefit pool.
• Cost efficiency: Insuring two people under a single joint policy is often less expensive than purchasing two separate individual policies, particularly when considering the extension of benefits and inflation protection riders.
• Simplified administration: One policy, one premium payment, and one set of paperwork makes joint coverage easier to manage than maintaining two separate policies.
• Survivorship benefits: Joint policies often include a survivorship death benefit that pays out upon the death of the surviving insured, ensuring that any remaining value in the policy passes to the couple's beneficiaries.
• Continuation provisions: If one spouse passes away without using LTC benefits, the full remaining benefit pool continues to be available for the surviving spouse.

The joint coverage feature is particularly appealing for married couples in their 50s and 60s who are planning for retirement together and want to ensure that both partners are protected against the financial risk of long-term care. Statistics show that at least one member of a couple turning 65 today has approximately a 70% chance of needing some form of long-term care, making joint coverage a practical and valuable planning tool.

Flexible Funding Options

OneAmerica's Asset-Care offers several funding approaches to accommodate different financial situations:

• Single premium: A one-time lump-sum payment funds the entire policy. This is ideal for repositioning low-yielding assets like CDs, savings accounts, or existing annuities.
• Five-pay: Premium payments are spread over five annual installments, making the coverage more accessible for those who prefer not to commit a large sum all at once.
• Ten-pay: Premium payments are spread over ten annual installments, further reducing the annual financial commitment and aligning well with working years before retirement.
• Flexible pay: Depending on the product version, some additional flexible payment options may be available to customize the funding schedule.
• 1035 exchange: Existing life insurance policies or annuities can be exchanged into an Asset-Care policy on a tax-free basis under Section 1035 of the Internal Revenue Code.

The 1035 exchange option deserves special emphasis. Many consumers own life insurance policies or annuities that no longer serve their original purpose. Perhaps the children are grown and the need for a large death benefit has diminished, or perhaps an old annuity is sitting dormant with significant deferred gains. A 1035 exchange into Asset-Care allows these assets to be repurposed for long-term care protection without triggering any tax liability, a powerful planning strategy.

Financial Strength and Stability

OneAmerica and its State Life Insurance Company subsidiary maintain solid financial strength ratings:

• A.M. Best: A+ (Superior) - This rating reflects OneAmerica's strong balance sheet, favorable operating performance, and appropriate business profile.
• Standard & Poor's: AA- (Very Strong) - This rating indicates S&P's confidence in the company's financial stability and ability to meet long-term obligations.

While OneAmerica may not carry the same name recognition as some of the larger national carriers, their financial strength ratings are in the same tier as companies like John Hancock and Lincoln Financial. The company's long history and commitment to the long-term care market provide additional reassurance.

Underwriting and Eligibility

OneAmerica's underwriting for Asset-Care varies depending on whether the applicant chooses the life insurance-based or annuity-based product:

• Life-based Asset-Care: Requires full life insurance and long-term care underwriting, including health questionnaires, medical exams, medical records review, and cognitive screening for older applicants.
• Annuity-based Asset-Care: Requires long-term care underwriting but not full life insurance underwriting. This can be an advantage for individuals who have health conditions that might make life insurance underwriting challenging but who are still functionally independent and able to perform activities of daily living.

Generally, Asset-Care is available for applicants ages 40 to 80, though the most favorable pricing is typically available for applicants in their 50s and 60s. The upper age limit for the annuity-based product may extend higher than the life-based version.

Pros of OneAmerica Asset-Care

• Dual product options: Both life insurance-based and annuity-based hybrid LTC products under one roof, providing options that most competitors cannot match.
• Excellent joint coverage: The shared-pool joint coverage option is among the best in the industry for couples planning together.
• Annuity-based option for harder-to-insure individuals: The annuity version with its less stringent life insurance underwriting opens the door for people who might be declined by other carriers.
• 1035 exchange friendly: Easy repositioning of existing life insurance or annuity assets on a tax-free basis.
• Committed LTC market participant: OneAmerica has remained dedicated to the long-term care insurance market while many competitors have exited, demonstrating long-term commitment.
• Return of premium: Policyholders can get their money back (less benefits paid) if circumstances change, providing an important safety net.
• Flexible funding: Single-pay, five-pay, ten-pay, and 1035 exchange options accommodate a wide range of financial situations.
• Strong financial ratings: A+ from A.M. Best and AA- from S&P provide confidence in the company's long-term financial stability.

Cons of OneAmerica Asset-Care

• Lower brand recognition: OneAmerica and State Life are not household names, which may give some consumers pause compared to more widely known carriers like John Hancock or Lincoln Financial.
• Product complexity: With multiple chassis options (life and annuity), joint and individual coverage, and various funding methods, the Asset-Care product line can be complex to navigate without guidance from a knowledgeable advisor.
• Joint coverage trade-offs: While the shared pool is generally advantageous, it also means that if one spouse uses a large portion of the benefit, less remains for the other. Couples must weigh this against the cost savings compared to two individual policies.
• Annuity version limitations: The annuity-based product does not provide a life insurance death benefit, which may be a drawback for those who also want legacy protection for beneficiaries.
• Distribution limitations: Asset-Care may not be available through all brokers and financial advisors, potentially limiting access for some consumers.
• Less competitive for pure death benefit: If your primary need is life insurance with LTC as a secondary concern, other carriers may offer more competitive death benefit amounts for the same premium.

Who Is OneAmerica Asset-Care Best For?

OneAmerica's Asset-Care products are particularly well-suited for:

• Couples planning together: The joint coverage option makes Asset-Care one of the best choices for married couples or domestic partners who want efficient, comprehensive long-term care protection for both individuals.
• Asset repositioners: Individuals with low-yielding CDs, savings accounts, or old annuities looking to put these funds to better use with long-term care protection.
• Those with existing annuities: The annuity-based Asset-Care with 1035 exchange capability is ideal for consumers with deferred annuity gains who want to reposition without triggering taxes.
• Individuals with health challenges: The annuity-based option with its less restrictive underwriting can serve people who cannot qualify for life insurance but are still functionally independent.
• Conservative planners who want flexibility: Multiple funding options and the return-of-premium feature provide financial flexibility while securing long-term care protection.

Comparing OneAmerica to Other Hybrid LTC Carriers

OneAmerica occupies a unique position in the hybrid LTC market due to its dual product approach and joint coverage capabilities. When comparing carriers, consider how Asset-Care compares to Lincoln Financial's MoneyGuard III, John Hancock's hybrid products, MassMutual's CareChoice, and Brighthouse SmartCare.

For couples, OneAmerica's joint coverage is difficult to beat. For individuals looking to reposition annuities, the annuity-based Asset-Care is a standout. But for those focused on pure life insurance benefits with LTC as a rider, carriers like Lincoln Financial or John Hancock may offer more competitive options.

An independent advisor who specializes in hybrid long-term care insurance can help you navigate these comparisons and find the product that best matches your unique circumstances. Request a free, no-obligation quote today to get started.