In a past life I sold a fair amount of life insurance particularly to small business owners. In that market it was essential to be familiar with buy-sell/stock redemption plans. After working with the prospects and their attorney on an assortment of issues and the implications of various sorts of buy-out arrangements the conversation would turn to funding. The life insurance piece was fairly straightforward. Many times, however, the disability component was left unfunded for any number of reasons; cost, occupation of the owners, definition of disability, financials and the lengthy waiting periods inherent in disability buy-out products were just some of the stumbling blocks that we struggled with.
Today, however, Nationwide Insurance Company’s Ultimate UL product, sold with theAccelerated Benefit Rider for Health Care:
- Pays the face amount to the policy owner when the insured dies.
- Pays the face amount to the policy owner if the insured suffers a disability (more on this in a moment)
- Allows the insured to continue the coverage (after they dissolve or leave the business) providing them with some basic life and long-term care insurance protection.
First, Ultimate U.L. is, for want of a better description, a Term/UL product. By this I mean it is not intended for cash accumulation. And, while it is initially more expensive than term insurance, it is designed to have a level premium through age 100 and a guaranteed (no lapse) death benefit for the life of the insured.
Second, the Accelerated Benefit Rider for Health Care pays the face amount to the owner of the policy in the event the insured qualifies as a chronically ill individual, which means; (1) the inability to perform two of the six activities of daily living or (2) the insured suffers an impairment of cognitive ability. If this looks similar to the HIPAA definition for long-term care your memory serves you well. In addition to these two disability qualifiers, a terminal illness will also allow for payment of the benefit to the policy owner.
The accelerated benefit, which equals the face amount of the policy, is paid to the policy owner over a 50-month period after a 90-day elimination period. The monthly benefit is ‘indemnity-style’ meaning it operates something like a per diem method of payment in a long-term care insurance policy. A doctor’s certification and a plan of care are required but the policy owner will receive the monthly benefit regardless of services incurred. After the 50-month benefit pay-out the policy retains a 10% residual value that will be paid to the beneficiary of the policy at death.
Third, when the insured chooses to leave the business or retire the policy owner can transfer ownership of the policy to the insured without a transfer for value issue. Thus, the client now has a life and long-term care insurance policy with a guaranteed premium that is most likely far less expensive than what they could purchase the policy for at their attained age. In my mind, this is a triple-win for business owners and their beneficiaries.
Based on the insured’s age and due to inflation, it is unlikely that Ultimate UL with theAccelerated Benefit Rider For Health Care will provide enough coverage to pay for all of the insured’s long-term care needs particularly if they have a typical claim in their mid-80′s. This fact presents an opportunity for you to sell a traditional limited benefit (three to five years) long-term care insurance policy with 5% compound inflation protection to the client that will act as the first line of defense when they need care later in life. In the event that their traditional policy’s benefits are depleted Ultimate UL will fill part or the entire gap. If the insured never uses or does not outlive their traditional LTCi policy benefit, Ultimate UL will pay a death benefit thus acting as a return of premium to a named beneficiary.
This is just one of the many innovative sales ideas that you will learn about at our Multiple Streams of Income continuing education and sales training seminars on September 25th and 26th. Space is getting very tight so register today!