Are your Clients Eligible to Access Life Insurance for LTC Expenses but Don’t even Know it?

Rider Trend:  Life Insurance has grown up to be more than life insurance offering Living Benefit Riders to be used while the insured is still alive. (LTC, Chronic Illness, and more recently Critical Illness).  These riders have arguably become the #1 trend in the life insurance industry over the last 15 years and can now be found on every product category:  WL, IUL, GUL, UL, VUL and for some companies even on Term.

• John Hancock and Nationwide Insurance: 20 years ago, 2 companies offered a LTC Rider
• Equitable (AXA): introduced their LTC Rider 15 years ago
• National Life: has offered their living benefit solutions for over 20 yrs.  Today, they continue to be a pioneer with their unique offering of a Critical Injury Rider in addition to their Chronic and Critical Illness riders.
• Last 10 years – LTC and Chronic Illness riders became table stakes: Today you would be hard pressed to find a permanent product without a LTC or Chronic Illness rider. (Note early editions of Chronic Illness riders required the insureds condition to be permanent and expected to last the rest of their life).

Check and See:  If you sold a life insurance policy in the last 10-20 years, your clients may have this valuable benefit but don’t even know it.  Consider a family out there right now struggling and sacrificing to pay for the Home Health Care expenses of their loved one. Meanwhile their loved one owns a life insurance policy with a rider that would allow them to accelerate (pay out) the death benefit to help cover expenses for their care.  Maybe your client is the family member? Maybe they are the insured or policy owner?  As insurance professionals, it’s important to maintain contact with your clients.  Go ahead, check their policies to see who has what rider?  Consider reaching out to your clients to remind them of the riders they have. This can go a long way in building goodwill and help further strengthen your relationship.

Did you sell a rider “with monthly charges” or “charges calculated at acceleration”?  Since all these riders vary by design, great care should be taken in weighing the pros and cons of going on claim or not.  As a general rule, if the rider deducted monthly charges, then the amount eligible for acceleration is predictable.  However, if charges are calculated at the time of claim then the amount eligible to be accelerated can vary significantly depending on factors such as:  age, life expectancy (severity of condition), gender, future premiums, cash value, permanent or Term product, and interest rate.  (Note:  prior withdrawals and loans can reduce the amount eligible to be accelerated).

Here are some questions you can prepare for: (a) how much of their death benefit is eligible to be accelerated?  (b) is there a charge at acceleration and if so, how much? (c) do they have to pay premiums while on claim and even if not required, should they?  (d) should they go on claim if their condition is temporary?  (e) if they come off claim is there a catch-up premium? (especially relevant for GUL chassis), (f) does it make more sense to take a loan instead – if they have healthy cash values?  (g) for Chronic Illness designs with “charge at acceleration” which formula is used to determine eligible amount?  (discounting which is more prevalent or lien method)?  The insurance company will be able to help you and/or the policy owner answer all these questions and more.

If a Tree Falls and Nobody Hears it…  September is Life Insurance Awareness Month and this year in the middle of a pandemic consumers have a heightened awareness on matters related to life, health and death.  We don’t need a campaign of testimonials to reinforce the importance of life insurance.  This year we are all already painfully aware.  Living Benefit Riders have revolutionized the life insurance industry and breathed new life into life insurance.  Still, if a tree falls and nobody hears it does it make a sound?  No.  It only makes a sound if your clients know what riders they have.

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This article from Living Benefit Review, LLC was prepared for use with financial professionals who are experienced in insurance and/or investment matters.  As a result, it should not be reviewed or relied on by any other persons.  LBR does not provide tax, investment, insurance, accounting, or legal advice.  Any tax statements contained herein, cannot be used for the purpose of avoiding U.S. federal, state, or local tax penalties.  LBR articles are general and accordingly, should not be considered investment advice or as a recommendation that any particular company, product, rider, or feature is appropriate or suitable for any particular individual.  State variations and availability apply to insurance company products and/or riders.  This article and any views or opinions expressed are for informational purposes and are not guaranteed for accuracy.