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How to find long-term care options in today’s marketplace - Part 1

By: Adam Bezman, Senior Director of Product & Innovation

With market exits from major long-term care carriers, how are consumers getting access to these needed benefits, affordably? In this series, we will discuss two life and long-term care policy options. In particular, benefit restoration and a flexible death and long-term care benefit. Both provide a significant amount of value to the policyholder, but not all of these plan options are created equal.

The care effects of longevity

Our aging population is growing older in an era where there’s been a dramatic collapse of long-term care (LTC) insurance options. Many carriers have exited the market, causing a rise in the cost of LTC policies, which were already quite costly. 

Products that can provide a combo approach for life and long-term care are becoming more commonplace to fill this gap. But they all aren’t designed the same, and different designs can have a significant impact on value to the policyholder.

There are some challenges to be aware of when selecting the right plans for your clients, and the same is true for riders, especially benefit restoration. 

Not all restoration is the same

Let’s talk a little about restoration riders, in general. Benefit restoration restores part or all of a death benefit if a portion of a policy had been used to pay for LTC. Some life and long-term care plans may only restore the life portion after a policyholder drains his/her LTC benefit. 

Consider the following examples: 

Drain and restore – Let’s say you have a policy that provides benefit restoration once the full policy face amount has been used for LTC. So, if you have a $100,000 policy and you use $75,000 for long-term care, your beneficiary would only receive $25,000 when you pass away. The restoration on this policy never happened because the policy was not fully drained up to $100,000 by LTC.

Partial restoration – If you have a $100,000 policy and your benefit restoration rider only restores 25 percent of the face amount, then your beneficiary would only receive $25,000 when you pass away. The restoration took place, but the entire face amount was not restored, because the rider only provides partial restoration.

The challenge is finding a combo product with benefit restoration that restores the entire face amount when the policyholder passes away, regardless of how much LTC has been used. Whether a consumer has used $0, $50,000 or all $100,000 of a $100,000 policy for an LTC benefit, if a restoration rider was purchased, the best value to the consumer would be to restore the death benefit to the face amount of the policy—$100,000. A good benefit restoration rider should only increase a policyholder’s premiums by 4 to 6 percent, and in this example, would leave all of the $100,000 benefit to the beneficiary.

Want to know what else to look for? Stay tuned for next week’s blog to learn more about flexible death and LTC benefits; in particular, products that fluctuate based on the age of the policyholder. Yes, they exist!

About the author: 

Adam Bezman joined Trustmark in March 2016. He is senior director of product and innovation for Trustmark's universal life insurance products. Adam has 15 years of product development experience in the insurance, health and food industries with prior experience at Life Fitness, a division of Brunswick and Kraft Foods in addition to his experience at Trustmark.

Posted on March 21, 2018 in Life Insurance

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