Perhaps the two biggest fears of retirees and pre-retirees are running out of money during retirement and how to fund a major acute health-care event. Recently, the Phoenix Companies, Inc. introduced a new annuity that it contends addresses those concerns in one package.
For an added fee, the Protected Solutions Annuity offers policyholders the ability to cover expenses related to chronic care either in a nursing home, an assisted-living facility or within a residence. The policyholder is further entitled to an enhanced death benefit.
Dana Pedersen, right, vice president and product officer for Hartford, Conn.-based Phoenix Cos., said in an interview with LifeHealthPro.com that this new annuity overcomes one of the principal objections to a standard long-term care insurance policy‑the “use it or lose it” element that means a policyholder can pay into the contract for years without ever actually using the health-care benefits.
However, if the chronic-care benefit is not used, this latest Phoenix Cos. annuity provides a cash surrender value as well as an enhanced death benefit to the policyholder’s heirs. “It gives clients a better peace of mind knowing the protection is there but if they don’t need, they still have something to show for it,” Pedersen said.
The new annuity is being offered exclusively through the AltiSure Group. Phoenix Cos.’s first foray into an annuity with long-term care benefits was about five years ago when it offered a GLWB on a variable annuity that was enhanced if the policyholder was confined to a nursing home. The Protected Solutions Annuity is not tied to a GLWB and offers more comprehensive long-term care benefits, Pedersen said.
The underlying framework of this latest product is a single-premium fixed indexed annuity with a 12-year surrender charge and “a standard level of commissions,” Pedersen said. It offers two indexed accounts as well as a fixed account. The fee for the chronic care/enhanced death benefit is 150 basis of the annuity’s account value, Pedersen said.
Policyholders must wait five years before dipping into the chronic care benefits, Pedersen noted. Because of that waiting period, underwriting is not as detailed as it would be for a standard LTCI policy or a combination life or annuity policy with long-term care features.
However, applicants are asked questions about whether they have been diagnosed with or have been treated for a serious illness, such as heart disease, cancer or Alzheimer’s. “Obviously, we had to protect ourselves against the potential risk of lives that could be more costly to insure,’ Pedersen said. “That’s why the product doesn’t offer any benefits during that initial five-year waiting period because of the limited underwriting.”
She added that the benefits accrue the longer a person waits to utilize the chronic-care option. The long-term care feature is triggered when a person cannot perform at least two of six ADLs, or activities of daily living, such as bathing, dressing and eating.
“The benefit amount is a multiple of the premium, and that multiple grows each contract year between years five through 15,” she explained. “Then when you trigger the benefit, we pay out to the client that accumulated benefit over a five-year period if they should remain confined to a facility or are receiving any kind of chronic care.” The enhanced death benefit works in a similar manner and is paid out over five years.
Phoenix Cos. has received some applications for the product already, Pedersen said. “I do think it will take a bit of time to resonate in the marketplace because it is new and it is different,” Pedersen said. “But we do think it will be popular because it is unique. I don’t think there are a lot of products out there that provide this combination of benefits. We are all‑clients, insurers and producers‑dealing with a very low interest rate environment, so it takes some unique combination of features to provide value to the client.”