Industry: Life Ins - LTC
Be a Hero, Tell them about their Life policy:
How to help your clients (and yourself) during this pandemic by identifying the riders they already have and helping them understand their policy. This is crucial, as many policy owners and their beneficiaries don’t even know they have them. On that note, now is a good time for policy owners to review and update their beneficiaries. Connecting with them now – will give you the chance to be a hero, by giving them peace of mind in helping them understand when and how they can access their proceeds while alive (living benefits) or making sure their policy is paid out exactly as they intend at death.
How you can help: The good news is you’ve done an excellent job selling them life insurance policies with the Chronic, LTC or Critical Illness rider (some companies even automatically include them). How then – during these trying times can you help ease the fear of your clients, especially for those at higher risk? The answer is: identify which of your clients have the rider and inform them. This will be a great gesture toward building good will and may even generate new sales down the road. In rare instances, for some clients, your phone call may uncover their policy is eligible to accelerate right now – not even related to COVID-19. Consider our insurance industry history: life policies sitting in states’ unclaimed property (along with other assets) or the death master file settlements from a few years back. The point is, sometimes policy owners don’t keep good records for their heirs nor understand the features of their policy. Due to this history, we can infer that today – some don’t understand the riders that are currently available on active policies. This might be especially relevant to you if your book of business includes orphaned policies where you may not have strong ties to the policy owner or family.
Take an inventory and identify which of your clients have a rider
- Identify policies sold with a LTC, Chronic Illness, or Critical Illness Rider
- Due to Covid-19, you may decide to focus on policy owners where the insured is:
- Age 65 and over
- Those that were underwritten with the following conditions: asthma, heart, or diabetes
- Note: The point isn’t about them getting the virus or accelerating. Instead it’s to give them peace of mind about their policy’s living benefit, the death benefit, and ensure updated beneficiaries
Review the rider key features
- Literally review the rider benefit attached to the policy. Differences vary substantially from company to company. Plus, some companies have numerous rider variations with some benefits being strong on some riders while others are limited.
- Did you sell a rider that has a monthly charge, or a charge applied at the time of acceleration? This is important as it impacts the amount that is available to accelerate. Those riders where the charge is taken at acceleration obviously do not offer the full death benefit to be accelerated since the charge must be deducted first. For some insureds, (such as those with long life expectancies) the charge at acceleration can be excessive resulting in a nominal benefit.
- Are premiums required to be paid while on claim?
- If premiums are required to be paid while receiving monthly benefits and they do not pay the premium, then the policy could lapse, even while on claim.
- If premiums are not required to be paid, then – once they come off claim they may still need to catch up missed premiums (especially for GUL’s). For this reason, some policy owners will only choose to accelerate their policy once they are confident their condition is permanent. Note, if the policy was designed for cash accumulation and has appropriate values, they may decide to take a policy loan vs. submitting a LTC claim.
- Can Chronic Illness & LTC riders be added after the policy is already in force?
- If the company offers a rider that is electable at issue (not automatically included), then most will not allow the rider to be added after policy issue. For the companies that do, adding the rider is subject to underwriting approval.
Make courtesy calls to policy owners empowering them with knowledge about their policy
- Talk to the Policy Owner (not the insured): even though the life of the insured is the driving factor in meeting eligibility criteria to accelerate these riders, only the policy owner has the right to make a claim while the insured is living.
- Tell them about their rider benefit: how much is available, what the eligibility criteria is to accelerate, and who to call when making a claim if the need should ever arise.
- Explain how accelerating the policy will reduce the death benefit available to the beneficiaries. Is it a dollar for dollar reduction, where the remaining amount not accelerated will be paid as a death benefit? Is it a discounting or lien method where up to a good portion of the remaining death benefit could be reduced to cover the charge? (Varies depending on age, sex, cash value, rate class, discounted rate, or lien rate).
- Now may be a good time for them to make trusted confidants aware that the life policy exists and of the riders available on the policy. (It could be that by the time the policy owner/insured is eligible to accelerate the death benefit, they may not have the mental capacity to let their loved ones know).
- Review beneficiaries: Sometimes such as after a divorce, the policy owner still has an ex-spouse listed as beneficiary or additional children may have been born that need to be added. Once they have updated their beneficiary designation, they should get a written letter from the insurance company confirming the change has been made to keep with their files (and even give copy to their beneficiary if they choose).
You are in this together with your clients. You sold them a life insurance policy that offers both a living benefit and a death benefit. Although we certainly never anticipated suffering through this heart-breaking pandemic, it’s times like this that reveal what matters most. Suddenly, it’s become crystal clear that doctors, nurses, truck drivers, and grocery store workers – were America’s soldiers and true heroes all along. I submit – that insurance professionals are also about to be recognized by families as heroes too.
For Financial Professional Use Only.
Not for Use with the Public.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 may apply to insurance company products and/or riders. This article and any views or opinions expressed are for informational purposes only and are not guaranteed for accuracy.