Americans are worried! They are worried about getting sick as they age and that cost eating away their assets. The biggest problem is that they are not doing any early planning for that financial challenge.
The good news, you can help. Today’s life insurance benefit plans will allow your client to create a pool of money that they can either pass to their loved ones or use during their lifetime if they have a chronic illness later in life that may be very costly. And they can create this pool of money at NO ADDITIONAL COST!
What I am talking about is the living benefits in life insurance plans that use the “Discount Method” of distributing the benefit, when necessary. Let me explain. There are two types of Living Benefits available in life plans today. data mining One your client pays for up front that allows them to know that they will receive the Living Benefit if the need to use it. Typically they can choose to receive 2 to 4 percent of the benefit amount on a monthly basis. With the “Discount Method” your client does not pay any additional premium up front for the benefit, but if it is needed, they can choose to accelerate a certain percentage of the face amount, then that amount is discounted based on certain factors like:
- Severity of the chronic impairment
- Their age
- Administration fees
There are several different formulas in life plans so let’s look at a common one to get a better understanding of how they work.
Joe, age 50 purchases a $500,000 life insurance policy to protect his loved ones. This policy has a Chronic Illness Rider that utilizes the discount method of payment, for which he pays no additional premium.
At age 75 Joe is diagnosed with a chronic illness and cannot perform 2 out of the 6 activities of daily living.
He elects to receive the maximum benefit amount (24% or $240,000 whichever is less) during each election period (12 months). He can elect to receive his benefit:
- Lump sum
- Every 6 months
Joe has passed his 90 day elimination period and the benefit is paid.
What does that look like from Joe’s $500,000 pool of money?
- His maximum benefit per election period 24% or $120,000
- Discount based on age and charges are applied
- Actual payment received – $87,298
- What happens to the difference
- Pool of money reduced by
- Maximum benefit election
Each election period, Joe can elect the maximum benefit based on the full face amount. He can receive money until his pool of money is used up.
Here is another way of looking at it.
So which is better? I will let you be the judge of that. But if you can add this type of value to your client’s life insurance policy at no extra cost, I certainly think it is worth talking to them about.
Want to learn more about the “Discount” Living Benefits? Click here.