Living Benefits verse No LB.

[Cornelius]

Does anyone have any numbers on the percentage of people who have used the LB riders within a policy?

 

[Allen Trent]

Does anyone have any numbers on the percentage of people who have used the LB riders within a policy?

I can state with absolute certainty & confidence it is no more than 100%.

Govt expensive & decade long studies concluded it is somewhere between 0 & 100%

 

[LostDollar]

Does anyone have any numbers on the percentage of people who have used the LB riders within a policy?

Caveat, not an agent.

Just curious, how do you see this as being a useful piece of information to facilitate your sales of life insurance policies? Seems to me like it might be suggesting a sales or sales process focus on the wrong thing.

 

[LostDollar]

(caveat, not an agent)

When I was pondering this issue, the policies I was presented with would not allow withdrawal of 100% of the death benefit for Living Benefits. There was a residual amount left in the policy that would not be paid out until the policyholder's death.

That is true for all policies. Its a regulatory issue.

I think I have one that is an exception to that statement.

I think it allows LB of up to 100%, but has charges like Rousemark was talking about. However it seems to address AllenTrent's issue of charges not being spelled out.

Sometime later tonight or tomorrow when I have time to address the technical (for me) issues of refinding the rider information and getting some stuff in this thread, I will give you details.

(And NO, I have NOT spent the last few days combing the internet to find exceptions to challenge your statement. As it happens, I was just discussing a policy purchase with an agent last week. I was working for Death Benefits this time so I never even considered what LB riders might be present.)

With this thread as the impetus, I did some hunting for some advance LB rider information on the policy I agreed to purchase. What I stated above is what I think I saw.

 

[Allen Trent]

Caveat, not an agent.

Just curious, how do you see this as being a useful piece of information to facilitate your sales of life insurance policies? Seems to me like it might be suggesting a sales or sales process focus on the wrong thing.

there are at least 2 populations segments for me when I think of some of the living benefit riders, in particular, the Accelerated Death Benefit Chronic Illness Access (ADB CIA) aka Long term care riders:

1. those that truly need the protection to pay for the likely costs they will incur and dont have other sources, but not broke enough for government welfare programs to cover

2. those that have plenty of overall funds in retirement accounts, annuities, brokerage accounts, bank cash that want the piece of mind of knowing they have a "plan"

For me, many of those in #2 really wont need to utilize the LB at the time of need if they are getting proper counsel from CPA/financial advisor. If someone has hundreds of thousands or even millions in IRA funds, NQ Annuities with gains, why would they want to accelerate a tax free life insurance death benefit instead of spending the IRA/Annuity gains? Those IRA/Annuity funds have large tax bills when you die whereas the life insurance doesnt. So, other than some annual tax bracket planning, I foresee many in the #2 group not exercising the LB for CIA.

Similar to how people wanting to leave a charity a gift at death are best to leave a portion of IRA money/NQ annuity money instead of life insurance/Roth/After tax brokerage. The charity doesnt pay taxes, so why not leave family the tax free funds & give charity the most taxable accounts

Either way, having the free LB ADB CIA or the small cost ADB CIA can give the personal piece of mind knowing they have a plan earmarked for some of the costs even if they never end up using it. I believe this is one of the reasons for the explosion in ADB CIA, LTC hybrids in recent years.

Stand alone DI or LTC policies are a much better primary plan for dealing with some of this, but for many reasons most consumers & agents seek the path of least resistance etc

PS-- sorry if this is not germaine to what you were focused on, I can easily get sidetracked on tangents

 

[scagnt83]

I think I have one that is an exception to that statement.

I think it allows LB of up to 100%, but has charges like Rousemark was talking about. However it seems to address AllenTrent's issue of charges not being spelled out.

Sometime later tonight or tomorrow when I have time to address the technical (for me) issues of refinding the rider information and getting some stuff in this thread, I will give you details.

(And NO, I have NOT spent the last few days combing the internet to find exceptions to challenge your statement. As it happens, I was just discussing a policy purchase with an agent last week. I was working for Death Benefits this time so I never even considered what LB riders might be present.)

With this thread as the impetus, I did some hunting for some advance LB rider information on the policy I agreed to purchase. What I stated above is what I think I saw.

I have never seen one that allows withdrawal of 100% of the DB.

From what Ive always understood, a small DB must remain to keep the policy in-force and not create a taxable situation for the Living Benefits that are paid to the Owner of the Policy.

Now that IRS regulation does not necessarily prohibit 100% being advanced... but most insurance carriers do not want to put a customer in a taxable situation when its easily avoided. Hence the reason most do not pay out the full DB.

However, Im pretty sure many states have provisions that prohibit the full amount being paid, as a consumer protection measure. So it could vary to some extent by state.

Maybe that regulation has changed. Maybe its state specific to some small extent. Maybe Im just totally wrong... but Im 99% sure Im not.

Just like the AIG LB rider that actually pays the DB as income while still living over a 10 year period. If the whole DB were paid it would become taxable. Thats why they keep a small residual DB thats around 1%ish of the original.

 

[scagnt83]

Caveat, not an agent.

Just curious, how do you see this as being a useful piece of information to facilitate your sales of life insurance policies? Seems to me like it might be suggesting a sales or sales process focus on the wrong thing.

I think he is curious as to how valuable it actually is or if its more of just window dressing.

 

[scagnt83]

Does anyone have any numbers on the percentage of people who have used the LB riders within a policy?

Ive never seen one. I have seen some recent info on consumer sentiment towards them. An increasing number of people are interested or at least open to them.

But the issue with any industry stats is not all LB riders are the same. Free ones which mostly require permanent impairment are going to be used much less than the riders that cost a fee and do not require permanent impairment.

Also, its still a fairly new concept in the industry. It will take another 5 -10 years to really start seeing firm stats behind the claims side of it most likely.

 

[scagnt83]

there are at least 2 populations segments for me when I think of some of the living benefit riders, in particular, the Accelerated Death Benefit Chronic Illness Access (ADB CIA) aka Long term care riders:

1. those that truly need the protection to pay for the likely costs they will incur and dont have other sources, but not broke enough for government welfare programs to cover

2. those that have plenty of overall funds in retirement accounts, annuities, brokerage accounts, bank cash that want the piece of mind of knowing they have a "plan"

For me, many of those in #2 really wont need to utilize the LB at the time of need if they are getting proper counsel from CPA/financial advisor. If someone has hundreds of thousands or even millions in IRA funds, NQ Annuities with gains, why would they want to accelerate a tax free life insurance death benefit instead of spending the IRA/Annuity gains? Those IRA/Annuity funds have large tax bills when you die whereas the life insurance doesnt. So, other than some annual tax bracket planning, I foresee many in the #2 group not exercising the LB for CIA.

Similar to how people wanting to leave a charity a gift at death are best to leave a portion of IRA money/NQ annuity money instead of life insurance/Roth/After tax brokerage. The charity doesnt pay taxes, so why not leave family the tax free funds & give charity the most taxable accounts

Either way, having the free LB ADB CIA or the small cost ADB CIA can give the personal piece of mind knowing they have a plan earmarked for some of the costs even if they never end up using it. I believe this is one of the reasons for the explosion in ADB CIA, LTC hybrids in recent years.

Stand alone DI or LTC policies are a much better primary plan for dealing with some of this, but for many reasons most consumers & agents seek the path of least resistance etc

PS-- sorry if this is not germaine to what you were focused on, I can easily get sidetracked on tangents

You do bring up good points about those who can cashflow the care. But I think the larger issue is that most people dont know if they can cashflow the care or not... because the cost of care is such a huge unknown. Will they need 1 year of care or 10 years of care? Thats a $500k unknown.

Those who have $4m-$5m in retirement assets can cash flow it most likely. Those with just $1m or $2m in assets cant.

But then we get into the issue of how much DB we can actually afford in the older ages when people start to actually get serious about LTC protection. Does it make sense for a 65 year old to spend $250k in premiums over 30 years to get a $300k DB?? Depends on when they need the care doest it?..

IMO, the "sweet spot" for these products are ages 35-55. They can actually get a decent size DB for the premium spent. Making it actual insurance and leveraging of money, instead of just "self insured" using a structured product. And that scenario makes a lot more sense to use vs. IRA funds, you are getting 3x - 5x on your premiums, which is acting like real insurance vs. self insurance.

 

[Cornelius]

Caveat, not an agent.

Just curious, how do you see this as being a useful piece of information to facilitate your sales of life insurance policies? Seems to me like it might be suggesting a sales or sales process focus on the wrong thing.

My thoughts are more about product choice. There are carriers that don't offer LB and it would seem like if given the option between a policy with the LB and one without the one with LB wins.

But is the feature being used especially with term. It's said term makes it to death claim 2-3% so I was wondering how often and to what age brackets are the most claims made for LB?

Next would a stand alone CI policy be a better option if major health issues were a concern for middle income. As we know people figure out a death benefit for a reason.