By Jay Scheiner, JD, CLU
Partner, Agent Support Group-Feb. 2017
It’s a new world now, as the traditional Long Term Care (LTC) marketplace has evaporated, replaced by innovative new life insurance policies with comprehensive LTC and Chronic Illness Riders and linked benefit products.
– Survivor Life w/LTC Rider – Nationwide: This rider allows your clients (a couple) who desire LTC with guaranteed premiums first (and have less interest in life insurance) to obtain a large amount of LTC benefit for a far lower outlay than individual life policies with LTC riders.
*Note: This option is not approved in New York.
o How it works: Each insured is entitled to 50% of the death benefit for LTC. Example: $2MM policy provides $1MM each for LTC – paying a Maximum Monthly Benefit of two times HIPAA or 2% of each partner’s half of the face amount ($20,000). The residual life insurance may be left to the insured’s next generation or a charity of choice, etc…
– Term Insurance w/Chronic Illness Conversion Agreement – Minnesota Life (Securian in NY): For clients who plan to convert their term policy to permanent coverage in the future and desire chronic illness protection.
o How it works: Client buys 10/15/20 year term w/Extended Conversion Agreement and CICA – may convert to a policy with Accelerated Death Benefit for Chronic Illness prior to age 65.
o Allows conversion to UL w/Chronic Illness even if disabled!
o Perfect solution for one planning to purchase a policy with comprehensive Chronic Illness in the future and wants to qualify for it NOW. *This option is approved in NY and most states.
– Life Insurance AS a SUBSTITUTE for LTC/Chronic Illness Insurance: Your clients who can afford to pay the out–of-pocket costs of an extended illness can use life insurance to REPLACE the funds expended:
o How it works: Show your well–to–do clients how the purchase of a life insurance policy WITHOUT an LTC/Chronic Illness Rider can accomplish a similar or even better economic result as one with a rider – resulting in cost savings – so long as the client and his or her spouse/heirs can tolerate the delay in the payment of benefits.
o Example: Male 60 NS STD $1MM w/LTC = $26,900/Yr. IRR of Death
Benefit Age 85 = 4.0% / Age 90 = 2.3% vs. $1MM w/o LTC =
$19,700/Yr. IRR of Death Benefit Age 85 = 5.1% / Age 90 = 3.2%!
o Concept works so long as client has the assets to pay out–of- pocket. Even spending down some principal, the assets can be replaced on a guaranteed basis. This opens–up the insurance companies that may have the best life insurance rates for your client, but no LTC rider – or in cases where your client may be “shaved” to Standard on life insurance – but not on an LTC rider.