Filed Under:Life Insurance, Life Products

Planning for the long term

Long-term care riders may make today’s life insurance policies even more valuable to your clients.

Help your clients plan for the long-term by showing them the advantages of a whole life policy with a long-term care rider.
Help your clients plan for the long-term by showing them the advantages of a whole life policy with a long-term care rider.

Permanence. That’s the beauty, many say, of purchasing whole life insurance. As long as your clients pay the premium, which always stays the same, they essentially don’t have to worry about their policies. They’re guaranteed a specified cash value, death benefit and level premiums that never change.

Now with long-term care riders added to whole life policies, the coverage is even better. Customers can enjoy all the advantages of permanent life insurance, but they also receive a benefit that helps safeguard their assets in the event they need home health care or nursing home services for an extended period of time. And the price of adding a long-term care rider is less expensive than purchasing long-term care insurance.

Today, purchasing whole life insurance with a long-term care rider still makes a lot of sense. This flexible, add-on coverage expands the use of life insurance, making it more valuable to your clients and opening the door to more sales for you.

Support during challenging times

Though most people think of long-term care insurance as something they need only when they’re much older and in need of a nursing home, your clients could need long-term care services at any age. Roughly 40 percent of long-term care is provided to people under age 65 who need help taking care of themselves due to diseases, disabling chronic conditions, injury, developmental disabilities and severe mental illness.

Consider this example: Eric and his wife, Lisa, work full-time jobs to support their two children. The couple recently purchased a new home to accommodate their growing family. After a serious car accident left Eric with a broken hip and several cracked ribs, he needed a home health care professional for three months to provide medical assistance while he recovered.

Fortunately, Eric owned a whole life insurance policy with a $100,000 death benefit and a long-term care benefit rider. He received a 4 percent monthly payment from the death benefit of his policy that helped pay for his long-term care medical costs. Eric received $4,000 for three months to pay for his medical care, which left him with an $88,000 death benefit. Without this coverage, Eric would have had to pull money from his savings account or borrow money from his family.

The cost of long-term care

The cost of long-term care continues to rise, according to a survey by Genworth. In 2008, the national average annual cost for a private nursing home room was $67,525. Today, that figure totals $87,600. The national average hourly rate for home health aides is now $20 per hour. 

The toll on families with a loved one needing long-term care services is equally high, according to Genworth.2 Sixty-five percent of people caring for a family member missed work because of caregiving responsibilities, ranging from working less and being late or absent to losing jobs or having to change career paths. More than half of primary caregivers (57 percent) say they dipped into their own retirement funds or savings to help pay for the cost of caring for a family member.

With more people living longer and the increased number of aging baby boomers, there’s no question the demand for long-term care services will continue.

Long-term care riders offer a reliable backup plan

Most long-term care riders offer benefits when a person requires supervision due to severe cognitive impairments or when they’re unable to perform at least two activities of daily living (dressing, bathing, eating, etc.). Monthly benefits vary based on where the person receives care.

The most common structure is to draw down the policy’s death benefit using a percentage and/or a dollar amount for a set time period. Typical monthly benefits may look like this:

  • Long-term care facility — 6 percent of death benefit
  • Assisted living facility — 6 percent of death benefit
  • Home health care agency or professional — 4 percent of death benefit
  • Adult day care — 4 percent of death benefit

Whole life insurance policies with long-term care benefit riders provide a reliable backup plan for your clients. While the rider isn’t meant to cover all of a person’s long-term care expenses, it does offer a more affordable way to get extra financial protection that can help during challenging times. Some advantages these riders offer your clients include:

  • Access to a portion of the life policy’s death benefit to help pay for services needed due to a chronic or sudden illness, serious accident or cognitive impairment.
  • Coverage for various long-term care settings and services, including in-home care and assisted living facilities.
  • Premiums that can be forgiven while long-term care benefits are being paid under the rider.
  • A more affordable way to purchase long-term care coverage.

Selling whole life policies with long-term care riders also offers many advantages to you, including:

  • A more simplified underwriting process than the one required for long-term care insurance. Individuals generally answer only a few additional questions once they’ve qualified for life insurance. This means more of your clients are likely to qualify and their policies will go in force more quickly.
  • Increased persistency. The long-term care benefit makes the policy more valuable to the policyholder, which can equate to a longer revenue stream for you.

Help your clients prepare for the long term

No one thinks they’ll need long-term care until years from now, but reality paints a different picture. Help your clients plan for the long-term by showing them the advantages of a whole life policy with a long-term care rider. 

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