Living Benefits verse No LB.

[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.

• The owner may elect to accelerate up to 100% of the death benefit if the insured requires Extended Care, such as home healthcare, adult day care, and other qualified care.
• The amount payable to the owner is the elected portion (or all, if elected) of the death benefit multiplied by a specified percentage of 80% and reduced by an administrative charge of $250.00.**

You dont get 100%.

100% of the DB ... multiplied by 80%... means you get 80% of the DB.

I understand your confusion here. I am not a fan of products that are structured like this. There is no reason in the world to do that calculation other than to mislead the consumer during the sales process.

That is not how all (or most) carriers do the calculations.

Not a carrier I would sell to a client as my first choice of products. (I saw the carrier you posted earlier)

 

[scagnt83]

(caveat, not an agent)

I think, to be careful with wording, I would say the policy holder's use of a living benefits rider would substitute for their use of the policy's death benefit.

Maybe, maybe not. Remember that the LB riders are "up to" the maximum allowed. You can choose whatever amount you like. So you could take 50% as a Chronic Benefit and leave the other 50% as a DB.

 

[LostDollar]

You dont get 100%.

100% of the DB ... multiplied by 80%... means you get 80% of the DB.

I understand your confusion here. I am not a fan of products that are structured like this. There is no reason in the world to do that calculation other than to mislead the consumer during the sales process.

That is not how all (or most) carriers do the calculations.

Not a carrier I would sell to a client as my first choice of products. (I saw the carrier you posted earlier)

(caveat, not an agent)

Yes, poor wording on my part in that earlier post.

I do understand that if, or when, I own that policy, if I were to use the LB riders I would only receive 95%, 90%, or 80% of the death benefit I chose to accelerate.

Based on the wording in the riders, I also ASSUMED that the 5%, 10%, or 20% retained by the insurance company was also gone and would not be available to policy beneficiaries as death benefits. So if I consider my immediate family as a unit, 100% of the requested death benefit would be gone to us when I use an accelerated death benefit.

Now if I have misunderstood what would actually happen at my death and the retained 5%, 10%, or 20% remains in the policy as death benefit and would be paid to the policy beneficiaries, that is a different story and would make some change in the way I view the product.

I'm glad you saw the post I deleted. An interesting thing there, on Friday I happened on a couple of 8 year old posts by @TwiLight in an old SPWL thread where he was commenting about that carrier. When I saw a B++ rating comment, I immediately thought of you and Ray and that, based on your annuity comments, you might not strongly recommend that carrier. I also was interested to see that his 8 year old comment about cash available inside that carrier's SPWL policy was still spot on.

 

[LostDollar]

Maybe, maybe not. Remember that the LB riders are "up to" the maximum allowed. You can choose whatever amount you like. So you could take 50% as a Chronic Benefit and leave the other 50% as a DB.

(caveat, not an agent)

Yes, I agree 100% with that comment. My financial scale is quite a bit different than what you and Allen and Ray deal with on a regular basis. I am definitely guilty of thinking of a policy of $10K death benefit as I was typing comments. That gives me tunnel vision when it comes to considering part or all of the death benefit to be applied to LB uses. I could make 4 requests and burn 10% of the policy face in administrative fees, or I could make one request and be done with it.

 

[Allen Trent]

Based on the wording in the riders, I also ASSUMED that the 5%, 10%, or 20% retained by the insurance company was also gone

you are absolutely correct. These riders tend to be no charge up front, none annual, free to add the rider & no Underwriting. At the time of claim, you are charged both the admin fee & the discount because they are paying the death claim in advance of death & will pay the funds sooner than if paid only for a death claim. So, the 5% for terminal ilness discount is because they are paying claim up to 1 year or more than expected, meaning they dont have the money to still invest to have earning. The 10% discount for the Nursing home claim is because of the average nursing home stay & the carrier is paying the claim on average up to 2-3 years earlier. The 20% discount for home health is because someone needing only at home care has a longer life expectancy & the carrier is paying the death claim sooner than expected.

Example. $100k face amount with $3k per year premium. Client decides to accelerate $50k for terminal illness. Carrier will issue a new face page of the policy showing a new death benefit of $47,250 ($2500 for 5% fee & $250 admin charge). new policy premium will be adjusted down to around $1400.

Even though I dont personally sell policies & my primary carrier doesnt even manufacture the ADB CIA riders (only terminal illness rider), I actually dont mind these, especially for people that can buy life insurance buy have morbidity issues like existing chronic pain, back/neck issues, pain meds, etc. These individuals get declined for the riders that are underwritten & those riders also charge inside the policy annually for the benefit being chosen, even if it is still merely an accelerated death benefit with a more structured monthly payment like 2% or 4% of the face paid out. Those charge annually whether you ever use the living benefit & may end up costing the same amount or more than merely having the death benefit discounted by a factor at claim time.

I like the rider language you shared because it states what the charges will be. Many other carriers endorsements are completely silent on how much they will discount at the time of claim. There is no way to know if it will be 0% or 30% as they tend to just say $500 admin fee plus a factor we decide at the time of claim

 

[Tahoe Ray]

I would imagine the cost of care required for people with that level of chronic illness means the living benefits would eat up the payout for most of the life insurance component, so the rider could really be described as a substitution for life insurance rather than an additional benefit?

Correct.

It's a "Winnebago" product. Not as nice as your car but you can drive it, not as nice as your house but you can live in it.

It does nothing well but does two things at the same time that some people want.

 

[toolbelt]

Correct.

It's a "Winnebago" product. Not as nice as your car but you can drive it, not as nice as your house but you can live in it.

It does nothing well but does two things at the same time that some people want.

You've never seen my car! lol

 

[scagnt83]

Now if I have misunderstood what would actually happen at my death and the retained 5%, 10%, or 20% remains in the policy as death benefit and would be paid to the policy beneficiaries, that is a different story and would make some change in the way I view the product.

I'm glad you saw the post I deleted. An interesting thing there, on Friday I happened on a couple of 8 year old posts by @TwiLight in an old SPWL thread where he was commenting about that carrier. When I saw a B++ rating comment, I immediately thought of you and Ray and that, based on your annuity comments, you might not strongly recommend that carrier. I also was interested to see that his 8 year old comment about cash available inside that carrier's SPWL policy was still spot on.

No, you understand correctly. However, they might still leave a small DB of at least $1k or so. I could be wrong.. maybe the charges incurred eliminate any tax obligation since you dont actually receive the full DB.

Twilight knows his stuff, especially in that market. Its one of those products that doesnt really do anything that great imo. It doesnt build strong CV, it doesnt provide a very high DB, it doesnt provide strong LBs. However, its a product that many people are able to be approved for who would not otherwise be approved for better products since its simplified UW. Imo, products like that are often better not to do a single premium payment on. Breaking out the payments at least gives you a decent multiple on your money if used early on. And you can keep the other funds invested in something that will give a decent return on that money. A single premium product that doesnt give a high DB or CV causes a huge opportunity loss for the clients financial picture.

Yeah, the B rating is a huge issue for me. Its not that I "would not strongly recommend it"... I would not recommend it at all, to anyone, unless the B rated carrier was the absolute only choice available for them... which 99% of the time is not the case. Its the equivalent of buying a junk bond and calling it a "safe investment".

 

[scagnt83]

Correct.

It's a "Winnebago" product. Not as nice as your car but you can drive it, not as nice as your house but you can live in it.

It does nothing well but does two things at the same time that some people want.

You and I disagree to some extent here. At least when it comes to the strong chronic riders that do not require permanent impairment.

Traditional LTC is a "use it or lose it" product... with extremely high premiums.

Hybrid LTC is now essentially LTC with return of premium since the CV is stagnant and the DB minimal.

Life w/ LTC Rider provides the LTC protection needed. And if not needed, it provides a much better DB than the hybrid. And depending on the product, it provides a much better CV than the hybrid.

Now, if you are looking at someone 65+ and comparing benefits on a dollar for dollar basis, the hybrid wins the LTC benefit battle. But if a client cares about getting some type of return on their funds if LTC care is not needed, the Life policy wins every time.

And 65+ is a horrible age to start LTC planning... sure its when most start to seriously think about it... but that is not what they should be doing. As an industry, we need to start talking to people in their mid 40s-50s about Life w/ LTC riders... that is the age range it actually makes sense to start planning for it using life insurance. Not only from a financial standpoint with products used... but especially from a UW standpoint.

Imo, it makes a lot of sense for the middle market up to age 65. Ask a client like that if they would rather leave money to their kids or be forced to ask their kids to help pay LTC bills? Nobody answers that they want their kids to have to help with LTC bills. Sure they want to leave something if they can... but they much rather would leave nothing and not be a financial burden to children.

 

[Tahoe Ray]

Life w/ LTC Rider provides the LTC protection needed. And if not needed, it provides a much better DB than the hybrid. And depending on the product, it provides a much better CV than the hybrid.

I agree with this...but I also don't think most retirees need life insurance. That's why I prefer hybrids.