The Eight Elements of Extended Care Riders – Element 3 – Waiver of Premium

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 3 – Waiver of Premium

Most insurance companies waive premiums while the insured is on claim and qualifying for benefits under an extended care rider. However, some still require premiums to be paid and others waive only the premium for the extended care rider, not the base life insurance policy. If the premium is not waived, a client could continue to pay premiums from the same resource they have always used or redirect part of their extended care benefit to pay the premium. This could pose a problem if the cost of care greatly exceeds their policy benefit and they have to use their own funds. Most clients will expect their premiums to be waived upon filing a claim.

Look for Element 4 – Tax Code and Benefit Qualification in April

The Eight Elements of Extended Care Riders – Element 1

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 1 – Payment frequency

Life insurance policies with extended care benefits come in single-pay or multi-pay varieties. The single-pay plans were the first life insurance based extended care plans on the market. Clients pay one lump sum into a modified endowment contract (MEC) which is leveraged to purchase a death benefit and a long term care (LTC) benefit. In many situations, the death benefit approximately doubles the lump sum and the total long term care benefit nearly triples the lump sum. This policy design works well for clients with money already set aside to “self-insure” their extended care risk. Potential clients for multi-pay policies comprise a much larger market and account for most sales. These are funded with recurring (annual, semi-annual, quarterly, monthly) premiums and are an affordable option for clients who are used to paying for all their insurance policies (auto, homeowners, traditional LTC, health) in this manner.

Look for Element 2 – No-lapse guarantee in February.

Are Income Riders Always the Best Approach?

Presented by David Corwin

In my opinion, Income Riders are not always the best approach.  I will agree that they do give the client some satisfaction in knowing how much their income would be.  However, the power in the knowing I don’t think mitigates the fees, coupled with the outrageously long surrender periods that are sold most of the time.  What happens in most cases is that the agent presents only one product and doesn’t look at the different options that would lessen the surrender period, thus giving the client more choices at some point and not locking them up for 16 years or longer.

It’s an absolute certainty that if you show more than one option you will make more sales and the client will be more satisfied with their decision.  Now, I will admit that it might be a slower sales process, but shoving a product down their throat doesn’t do them any favors either.

Here’s an example of what I’m talking about.  I ran a top carrier product with the highest bonus and rollup rate on a 50 year old male with $100,000 and let it cook for 10 years before I started income and came up with $9,845.59 in annual income.  A green to red apple comparison with the same income rollup without a bonus would only reduce the income in 10 years to $8,950.54.  That’s less than $900 and the kicker would be that the surrender period is reduced by 6 years.

It is also widely known that an indexed annuity without a bonus performance should, and in most cases, does outperform bonus indexed annuities.  With that in mind, the client will undoubtedly have more money in the long run anyway.  All I’m really talking about is choices.  Give your client choices and they will make the right one the majority of the time, and you will have a more satisfied client.