Why is a CI policy so much more expensive than a CI Rider?

Dec 7, 2018 at 8:12 AM

  1. Abrasax
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    Abrasax Super Genius

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    With MoO, a 43 year old can get a $100,000 CI 30 yr CI policy with no riders for around $200/mo.
    It seems anyone wanting this feature will get all of it and more for much less from a TLE policy which has a the CI rider included along with the Terminal and Chronic. After the actuarial discount and the additional insurance you would need since the ADB only advances 80% of the DB, the TLE policy needs to be around $150,000 for the same $100,000 ADB but it's still far cheaper to just get the life policy.

    A female n/s of the same age will pay 77/mo for a 30 yr TLE. A male smoker will pay only 165. Both significantly less than the CI on its own.

    Is this due to the fact that the TLE policy has more underwriting or something else? I'm just trying to understand how this works as it seems this might make a good selling point for just writing the TLE to cover MP, CI, and Chronic Illness benefits.

    Or is there something in the CI plan that you're not getting with the rider?
     
    Abrasax, Dec 7, 2018 at 8:12 AM
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  2. rousemark
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    rousemark Still Here!

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    Benefit payouts are considerably different.. The CI policy is going to pay the stated amount upon diagnosis of the condition. The CI rider is going to pay on the effect the condition has on mortality expectations. A good example is blindness. If blindness is a covered condition on the CI policy, it will pay the stated benefit. On the life policy rider, the payout is based the condition's effect on mortality which is affected on slightly by blindness.. When I was with AGLA, there was a blindness case where a person wanted to accelerate $50K of the death benefit. The company came back with an offer of only a few hundred dollars.

    The riders can be a good thing, but you can not depend on them if you are wanting to guarantee certain amount to replace your income if you have a CI. A lot of agents pusing the living benefits of the CI riders do not tell the client this. In fact, many of them do not even know how it works themselves.
     
    rousemark, Dec 7, 2018 at 9:22 AM
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  3. Abrasax
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    Abrasax Super Genius

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    On the major issues (heart attack, stroke, cancer) the payouts would be the full 80% (minus the actuarial discount) with TLE, wouldn't it? $150,000 X .80 (ADB) - (100,000x .135) = Payout. Is that right?
     
    Abrasax, Dec 7, 2018 at 9:55 AM
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  4. rousemark
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    Different cancers and cancer stages have different effects on expected mortality so the actuarial discount will vary. Each case is considered individually...You have no way of knowing what it will pay until the company makes their offer.

    Just remember, there is usually a direct relationship between cost and benefits. If one plan is a lot less epensive than the other, there is usually a reason.
     
    Last edited: Dec 7, 2018 at 11:09 AM
    rousemark, Dec 7, 2018 at 10:52 AM
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