With pensions fading into the past and Social Security on shaky ground, carriers have devised new and imaginative riders on annuity contracts, all with the purpose of giving your clients a lifetime of income.
Here's a look at some of the most intriguing developmentson the annuity rider front:
The emergence of hybrid death benefit/living benefit guarantees. Last year, for example, the Phoenix Cos. introduced a rider called the Enhanced Guaranteed Income and Family Wealth Transfer Benefit (Enhanced G.I.F.T. Benefit) that combines guaranteed lifetime withdrawals with an enhanced death benefit for one charge.
More long-term care options. Despite getting more favorable tax treatment starting last year, the pickings still are slim when it comes to annuity riders that allow access to contract funds to cover the cost of long-term care. But both McCarthy and Caner say more players could soon enter that space. "I would suspect that my company, along with many others, have already developed benefits like these, they just haven't launched them," Caner says.
Among those that already have launched, McCarthy points to the Long-Term Care Advantage rider offered by Lincoln National as noteworthy for its robustness of benefits. It pays a monthly amount for long-term care expenses up to three times the initial purchase amount, which must range from $50,000 to $400,000. The benefit costs 0.87 percent to 1.71 percent, depending on the options chosen, is capped at $1.6 million, covers a single life and applies only to non-qualified assets.
New speculative wrinkles shift more rider risk to VA owners
From withdrawal and step-up percentages pegged to T-Bill performance to rider fees linked to market volatility, annuity providers are asking investors to take on more speculative risk when they purchase living benefit guarantees.