Understanding The Nuances Of LTC And Chronic Illness Riders
As more Life Insurance carriers enter into the Linked Benefit marketplace, it’s important to understand that there are key differences in how their policy riders will provide living benefits to the insured.
Knowing the ins and outs of these riders will help save you and your clients from some potential problems in the future.
There are two different ways in which insurance carriers file for these accelerated benefit riders – first as a Chronic Illness Rider or second as a Long-Term Care (LTC) Rider.
What are the differences?
Chronic Illness Riders generally require a physician to certify the condition as “likely to last the rest of the insured’s life” while LTC Riders can be utilized for either temporary or permanent claims. While on claim for a LTC rider, policy premiums are likely to be waived though some carriers will still require the scheduled premium to be paid.
For temporary claims, you’ll want to be mindful that carriers can require a catch-up premium for the waived scheduled premium which was not remitted while on claim if the client recovers and is no longer in need of Long-Term Care. This can become very prohibitive if the scheduled premiums are significant and/or the client is on claim for an extended period of time.
One way to work around this issue is to have shortened premium paying period inside of a “paid-up” policy so that there would be no additional premiums due in later policy years when a client is more likely to have a LTC claim.
When promoting a Chronic Illness Rider, it is important to understand whether there is a cost or charge for the rider when it is accessed and also if there will be any limitations to the amount of the benefit available to the client.
Some products will not charge a cost until the rider is accessed and some carriers will not be able to determine the amount of benefit available until a claim is applied for. Clients should be made aware of these points before making a final purchase decision.
Another key consideration is how the benefit will be paid to the client.
For Chronic Illness Riders, it may only be a question of how frequently the benefit is paid out. For LTC Riders, you will need to know whether the rider is indemnity or reimbursement style.
Indemnity allows for the full benefit to be paid once the client qualifies for the rider without consideration for the actual expenses incurred as result of the LTC provided. Reimbursement riders will only provide benefit for the actual cost of the qualified LTC services and require the client to coordinate the benefit with the carrier.
These are just a few of the different features and functions that you should understand when promoting permanent insurance products which include living benefit riders. Additional consideration should be given to the specific details for each product and rider that you are recommending to your clients.
If you have any clients that you would like to consider for this concept or if you would like learn more about any of the particular products or riders available, please call your dedicated Life Sales & Marketing Specialist today.
