Life Insurance

The Eight Elements of Extended Care Riders – Element…

Presented by Brian Leising 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 8 – Inflation While inflation protection is common on traditional LTC policies, it is not commonly found on extended care riders. Some insurance companies do give clients the option to increase their monthly coverage at rates including 3% or 5% simple or compound interest, but this is rare. How else can we match the increasing benefit commonly found on LTC policies? One way to approximate the increase is to use an increasing death benefit option on a universal life policy. The death benefit (and corresponding extended care benefit) is the initial death benefit plus the accumulated cash value. The increase depends upon both the amount of money placed into the policy and the performance of the index account or the dividends declared by the company. An increase in death benefit equals an increase in extended care benefits. Another option to increase the benefit amount would be use the Federal per diem amount as the monthly payout. With the per diem option, the client’s monthly benefit is equal to the current Federal per diem benefit amount ($340/day in 2016). The amount has traditionally been increased by the Federal government an average of 4% per year. Although not guaranteed, this could mimic inflation protection. Keep in mind, the per diem monthly benefit does not increase the total amount of money available for extended care, just the monthly amount.
Life Insurance

The Eight Elements of Extended Care Riders – Element…

Presented by Brian Leising inding 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 7 – Payment method Insurance companies pay extended care benefits via one of two methods: reimbursement or indemnity. With the reimbursement model, the company either pays the insured’s health care providers directly or reimburses the insured upon proof of care expenses. The indemnity model offers the client a lump sum payment without having to provide an exact accounting of expenses. The insured may use the money however they wish. Some extended care expenses may fall outside the realm of traditional services. Maybe they wish to compensate a neighbor or loved one for providing care. The money could also be used to fly a loved one across the country, or for their hotel and meals while visiting. If the clients’ expenses fall below the indemnity benefit, they could request a lesser amount, save or invest the extra dollars. Look for Element 8 – Inflation in August.
Life Insurance

The Eight Elements of Extended Care Riders – Finding…

Presented by  Brian Leising 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 5 – Elimination Period The elimination period is the amount of time an insured has to wait for benefits after qualifying for them. Put yourself in the insured’s shoes, if you qualify for benefits, why would you have to wait to receive them? Despite this disconnect between consumer expectations and company practice, most policies contain a 90 day elimination period. Some have a shorter period for home health care and only a very few offer clients benefits immediately upon qualifying for claim. Look for Element 6 – Payment Amount in June.