Level Term Rates with Up-To Lifetime Coverage

Presented by Jim Linn

We receive several calls a day requesting quotes on clients that are 60+ years old.  Typically the agent is requesting the maximum term length for the least amount of premium.  In working with someone 60+ years of age, at best, the longest time frame of term insurance available is 20 years, taking them to age 80 or 90.  A new study on mortality showed that the average mortality today is approximately 87, meaning their plan would fail them 7 years too early if they elected a 20 year plan.  Several carriers now offer Guaranteed Universal Life (GUL) products that allow you to specify a time frame, such as coverage to age 90, 95, 100 or up through age 120.  These products are death-benefit driven and are not interest-rate based, allowing for a true guaranteed premium.  Also, depending on the state and product, most include an Accelerated Death Benefit feature for Terminal Illness, Chronic Illness or Critical illness, another added benefit of the product.  How do GUL’s compare against similar term options?  

Male age 70

Coverage Amount: $100K

Standard Non-Tobacco risk class 

20 Year Term Monthly Premium:  $290

GUL to age 90 Monthly Premium: $253 

That is a 15% premium difference for the same face amount and duration of coverage.  Plus the Accelerated Death Benefit features are included. Contact your life marketer at 800-397-9999 for more details!

The Eight Elements of Extended Care Riders – Element 4 – Tax Code and Benefit Qualification

Presented by Brian Leising

The Eight Elements of Extended Care Riders

Finding the right formula for each client

Not all extended care riders on life insurance policies are created equally. Do you know the differences? Different combinations will appeal to different clients more than others. Here are eight of the major distinguishing features among insurance companies offering extended care riders. All include some combination of the eight elements. This allows you to find the right formula for each client.

Premium Payments Benefit Qualification Benefit Amount
Pf Payment Frequency Pa Payment Amount
Lg Lapse Guarantee Tc Tax Code Pm Payment Method
Wp Waiver of Premium Ep Elimination Period If Inflation

Element 4 – Tax Code and Benefit Qualification

Insurance companies file their extended care riders and provisions under one of two (or both) tax codes, 7702(T) or 101(g). What’s the difference? Only the riders filed under 7702(T) may use the words “long term care” to describe the rider. Since the 7702(T) riders are viewed as tax-qualified LTC polices that have been added to a life insurance contract, the LTC benefit in many cases will exceed the death benefit of the underlying policy. Chronic illness riders (101(g)) may only accelerate up to the actual death benefit amount. The difference of greater concern pertains to benefit qualification. With either tax code, benefit qualification depends upon the client losing physical and/or mental abilities. The insured can qualify for benefits by losing the ability to perform two of six activities of daily living (ADL’s) or severe cognitive impairment (such as Alzheimer’s or dementia). With chronic illness riders (101(g)) an additional requirement must be met: the condition must be deemed to be permanent. An insured may recover, but the expectation they will not triggers the chronic illness (101(g)) benefit.

Look for Element 5 – Elimination Period in May.

“Thanks, but no thanks. I already have DI through work.”

Presented by Tim Dreher

I’m sure that most of you who market Disability Income Protection have heard this before, perhaps even many times. Personally, I actually like it when I hear that response from potential clients. Either it tells me that they were savvy enough to recognize the need for Income Protection and did something about it, or it was provided to them by their employer as a “one size fits all” benefit that may not fit their individual needs. Either way, I have an opportunity to expand on the DI discussion.

Let’s take a moment to look at some of the reasons that an employer provided plan may not be all it’s cracked up to be.

With an employer sponsored plan you normally have to take whatever plan design and benefits the employer offers regardless of whether the employee is paying for a portion of or even the entire premium. In my experience, most of these plans can have very limited monthly benefit amounts, limited or no riders (such as residual or partial disability benefits) and limited benefit periods (generally 2-3 years in length), even though many disabilities can last longer than 5 years, and in some instances, even for a lifetime. Employers, unfortunately, have to choose plans that fit the masses. As an example, what might be a good fit for a dental hygienist is probably not the best plan for a dentist.

Another point to consider is that those individuals that are in occupations that rely on commissions or bonuses for a large part of their income might also come up short as most employer provided plans use only the individual’s base salary when calculating any benefit payouts. This can leave those employees woefully underinsured.

Portability is another reason that an employer sponsored plan might not be the best fit. An employer sponsored plan typically ends when the job ends, whereas an individual plan follows that employee to their next job or even to self-employment. The risk remains the same so why shouldn’t the insurance plan remain the same also?

Finally, in my opinion, perhaps the biggest reason to consider an individual plan is how employer sponsored plans are taxed versus an individual plan. If an employer is providing the disability plan and paying the premiums then any benefits received from the plan would more than likely be taxable. This also holds true if the employee is paying the premiums out of their own pocket but on a pre-tax basis, then again any benefits received would likely be taxable. This could possibly mean a 20-40% reduction in any benefits received after the benefits are taxed. An employee thinking they are adequately insured could potentially find out the hard way (at the time of claim) that they are only getting a portion of what they thought they would receive.

The bottom line is that most employer provided plans can, and do, provide some benefits, which is better than no benefits at all. However, an individual DI plan is very flexible and can be tailored to provide additional coverage and fill in those gaps that an employer’s plan might be missing.

Providing LTC Coverage for an Uninsurable Spouse

Presented by Tim Dreher

Long Term Care awareness month is November and I wanted to expand on my last blog where I wrote about adding an insurable spouse/partner to take advantage of the substantial discounts that the carriers provide. In most cases the combined premium when adding the spouse/partner at minimum benefits, is less than if the one applied for coverage by themselves.

So what can be done in a situation where a spouse/partner is uninsurable? This can be a challenge to even the most seasoned producer. Many times the prospect will abruptly end the conversation when it is determined that there is an uninsurable spouse/partner.

It is important to point out to the prospect that what we see frequently happen, is the healthy spouse/partner becomes the care giver for that uninsurable spouse/partner. Many times that can happen much sooner than what anyone anticipated. As a result of being that caregiver, the health of the insurable spouse/partner declines rapidly due to the stresses of being that caregiver. It has been reported that up to 60% of caregivers were unprepared for the physical demands of being that caregiver.1 There is probably not a better argument for the healthy spouse/partner to consider and purchase LTCi.

Mutual of Omaha’s MutualCare LTCi policy has a very unique rider, called the Security Benefit Rider that can be added to an LTC policy to provide a solution for just such a situation.

If the insured spouse/partner requires long term care services after the policy is in effect, the Rider can be activated to provide additional funds to help pay for the cost of providing care for the uninsurable spouse/partner. Up to 60% of the insured’s monthly reimbursement benefit is made available to help pay for approved care for the uninsured spouse/partner. There is no medical underwriting required for this Rider, and the additional benefits paid out for the approved care do not reduce the insured’s policy limits. It is a separate benefit for an uninsurable spouse.

Unfortunately, there will be times when a producer will find themselves in a situation where couples/partners apply for coverage and one is declined. When this happens, we often will hear “If we both can’t get it, than we don’t want it”. You might want to consider this rider, as it might just be the answer to saving the sale.

This unique feature when understood, can be a great relief for uninsurable spouses/partners.

Talk with one of the LTCi marketing specialists at Financial Brokerage about more details on how this rider works.

  1. Transamerica LTC study 2015

The Income Stream Death Benefit – Part Three

Presented by Brian Leising

I’d like to help you close more life insurance sales by showing how an income stream death benefit can help your clients save money and better understand how their coverage works. We will explore the problem in part one, present a money-saving solution in part two and simplify everything in part three.

Make it easy

I realize the example in part two did not take into account the fact that a beneficiary receiving a lump sum could invest that amount and receive more than the lump sum divided by 20 each year over 20 years. Assuming a modest 3% interest rate, $735,490 would provide the beneficiary $50,000 per year for 20 years. A 30 year term life policy based on that face amount would cost only $638 per year. That’s actually slightly lower than the income stream death benefit price of $647.75 quoted previously. Why would a client pay an extra dollar per month for the income stream? Simplicity. What’s easier to understand: “$50,000 for 20 years” or “$735,490 invested at 3% should generate an income stream of $50,000 per year for 20 years. “

Sometimes we fail to understand the majority of the population does not deal with interest rates, inflation and compound growth on a daily basis. Keep it simple.

For income replacement life insurance sales, consider using the income stream death benefit option. It will help you close more life insurance sales, potentially save your clients money and certainly give them a better understanding of how their coverage works.