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Life Insurance Solution to the Long-Term Care Crisis

My dad passed away after he and my mom fought a valiant seven-year battle with his chronic illness. After he was diagnosed with Parkinson’s disease, he and my mom sacrificed some aspects of their lives for the sake of his care. My dad had life insurance, but he could not use it to help with his chronic illness. The benefit of his life insurance policy was realized only upon his death.


I am proud of my strong and inspiring mother, who is doing so well today. With all my heart, though, I wish the kinds of innovative accelerated benefit riders (ABRs) that are now available for life insurance policies had been available when my parents purchased their coverage. I can imagine all too well the difference that ABRs would have made in my parents’ lives had they been able to access part of the life insurance benefit while my dad was still with us.

Personal experiences like this are why I am so excited about the kinds of accelerated benefit riders available today. In particular, I want to share what I have learned about chronic illness riders and why, in some cases, they may be a preferred solution over other choices such as stand-alone long-term care insurance (LTCi).

The combination of life insurance with accelerated benefit riders, often called “insurance you don’t have to die to use,” can offer flexibility and access to a policy’s death benefit during the insured’s lifetime. I find myself almost unable to imagine why we all wouldn’t want this power to choose when and how we access benefits, particularly in situations that threaten to take options away. If I can add “optionality” back into my life, I want to do that!

Consumers need to know the rising cost of living longer

Let’s review the need for accelerated benefit riders, which helps us understand why consumers might decide life insurance with ABRs is their best option. When an advisor is meeting with a client about the life insurance solution that may be most appropriate, being able to describe the need for ABRs, including chronic illness riders, is crucial. Studies such as the Kaiser Family Foundation’s 2015 “Rising Cost of Living Longer” show the greatest amount of health care expenditures occur for end-of-life care.

Two of the trends highlighted in the Kaiser research are key components for helping consumers understand the general costs of living longer. The first trend is the multiplication of costs as we age. For example, the study stated that Medicare per capita spending in 2011 was 2.5 times greater for 85-year-olds and three times greater for 95-year-olds than for 66-year-olds. The second trend is that while per capita spending for physician and outpatient services peaked at age 83, it peaked at older ages for inpatient care (89), home health (96), skilled nursing facility (98) and hospice (104).

Add Kaiser’s results to the report from the Centers for Disease Control showing 86 percent of Americans’ health care dollars are spent on the treatment of chronic diseases, and you see a compelling picture of the need for Americans to plan for health costs related to chronic illness.

Reimbursements versus the indemnity model

As financial professionals, most of us are fairly familiar with LTCi. As a reminder, once policyholders have been diagnosed with chronic illness that prevents them from carrying out at least two of the six activities of daily living, LTCi products generally pay on a reimbursement model for approved expenses.

The need to incur expenses first and then submit receipts may not be the most convenient way for people to access benefits. Additionally, many LTCi products are limited in scope: An insured person may be able to have a home health worker’s time reimbursed but may not be able, for example, to recoup the cost of having doorways widened for wheelchair access.

Consumers may not know that ABRs give them a different choice. Chronic illness accelerated benefit riders attached to certain life insurance solutions are based on the indemnity model rather than the reimbursement model. This can be a huge game-changer for people who have appropriate combinations of life insurance and riders, meet the eligibility criteria of the chronic illness rider, and choose to trigger the acceleration of a portion of the death benefit.

They can begin to access cash value in the policy sooner, rather than later, via reimbursement. Additionally, the chronic illness ABR structure allows them to use the accelerated benefit to pay for virtually any kind of expense.

What are common questions regarding ABRs?

When I talk with people about ABRs, I find they may have concerns about extra costs, loss of benefits, and flexibility with their unique situations. First, some life solutions have ABRs built in, rather than available as an option at a separate cost. When they are built in and can provide flexibility and choice, why wouldn’t we want them?

For consumers who may have questions about accessing benefits and losing benefits, there are life solutions that do not lose value. If a covered person’s medical diagnosis meets the terms of the rider, they can access a portion of the policy’s death benefit, if needed, and save the remainder of the death benefit for their heirs — remembering, of course, to keep the policy in force.

Consumers may ask about flexibility to respond to certain situations, such as a medical diagnosis of chronic illness anticipated to result in decreased earnings and increased expenses. ABRs can provide flexible options depending on qualifying circumstances, and policyholders can choose how much of an allowed benefit to access. The power to choose is in the consumer’s hands.

Choice, flexibility, personalization

When we review the need for coverage and the options available, we are better able to offer clients the solutions that may make the most sense for their individual situations and help them choose how best to protect themselves and access available benefits. The potential for appropriate ABRs to empower consumers facing chronic illness with personalized choice and flexibility is one of the reasons what we as financial professionals do matters so much.

I encourage you to research life insurance policies with ABRs included (or available), referencing contingencies such as chronic illness and also critical and terminal illnesses. The products with which I am most familiar do not require financial professionals to hold specialty licenses as do LTCi riders or policies; however, the carrier-mandated training that financial professionals generally undertake in order to offer ABRs may be useful when talking with clients about the power to access available benefits when needed.

With Americans living longer, chronic illnesses more pervasive and care often costing more, the power to choose is more important than ever. The choices we bring to our clients are also more important than ever.

Kent Campbell is senior vice president of sales, AIG Partners Group. Kent may be contacted at [email protected] .

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