Posted by (American Life InsuranceIn the past few years, due to the company's gradual withdrawal from the long-term care insurance market and rising premiums, the market acceptance of traditional long-term care insurance (LTC) products has declined.However, long-term care financial solutions supported by life insurance companies have achieved tremendous growth.
Traditional LTC VS Integrated LTC
In 2017, the comprehensive policies bundled with long-term care insurance (LTC) increased by approximately 5%, and 260,000 new policies were sold.In contrast, in 2017, only 70,000 independent long-term care insurance policies were sold. Back in 2000, more than 750,000 long-term care insurance policies were sold.
In addition, for insurance policies that include long-term care, new premiums increased by 18%.25% of the new premiums in the United States go to policy products that provide long-term care or chronic disease protection.Although New York Life developed a new product for a separate long-term care insurance market in the summer of 2018, the entire industry is more focused on this type of comprehensive life insurance product market.
Advantages of comprehensive long-term care life insurance products
Although the comprehensive long-term care life insurance market has grown astonishingly, most policyholders are not clear about the difference and choice between it and traditional LTC.In general, life insurance policies that include long-term care insurance fall into one of the following two categories:
1) by U.S. law 26 USC § 7702(b) Defined and associatedAdditional terms (Rider).
2) by U.S. law 26 USC § 101(g)Additional terms (Rider) for the defined advance payment of insurance coverage.
The former is more like a standard "long-term care insurance" product that meets the definition, while the latter, such as premium payment in advance, additional clauses for chronic diseases, can be used to pay for long-term care expenses, but will not be counted as "long-term care insurance". Insurance Products.
101(g) Policy VS 7702(b) Policy
In a comprehensive life insurance policy, the most common benefit is the 101(g) "advance payment of sum assured" additional clause (Accelerated Death-Benefit Rider). These additional clauses usually have no additional upfront costs and are part of the insurance policy.These clauses cannot be sold under the name of "long-term care insurance" because this type of insurance policy will not payExceed the sum assuredAmount.
Under certain factors, this money can be withdrawn or used as compensation in advance while the insured is alive. This is the foothold of "pre-mortem benefits".All the advance payment clauses for chronic diseases are paid to the insured person in cash on a monthly or daily basis, and the actual expenses incurred are reimbursed.
"More and more insurance companies provide this kind of additional clauses for underwriting. They charge premiums and then allow the entire compensation payment to be withdrawn in advance. They do not require permanent conditions. When issuing an insurance policy, you can choose 2%, 4 % Or the maximum per day allowed by the HIPAA (Health Insurance Portability and Accountability Act)." Long-term care expert Bill Burton said, "baby boomers like this approach because they can be protected and they are paid directly at the time of claims. Cash, and the products specified in 7702(b) will be reimbursed for you at the designated care center.”
The life insurance policies defined by 7702(b) and associated with them can be sold in the market under the name of "long-term care insurance".Essentially, this type of policy is a life insurance policy and a long-term care additional clause (Rider).Most of these insurance policies promise a 6-year benefit fulfilment period.In the first two years, the insurance company pays the amount of the insured amount, and for the next 4 years or more, the 7702(b) additional clause continues to pay the reimbursement on a monthly basis.This type of insurance policy is usually paid for a large sum of money at the time of purchase.
Which long-term care insurance is more suitable for consumers?
Experts suggest that the 101(g) additional clause type is suitable for men, because they usually need care within two years.The 7702(b) additional clause is suitable for women. "If you buy a 7702(b) policy with a one-time payment, it is more like your own expense. Because if a person only needs two years of care, under the 7702(b) rider, the compensation you get is almost the same as the original premium paid."
The 7702(b) associated life insurance policy is cheaper than simply paying for long-term care, but it is much more expensive than the 101(g) policy with the additional clauses withdrawn in advance.In terms of taxation, the premiums paid by these two types of policies are not tax deductible.In addition, if your goal is very clear, it is to solve the problem of long-term care, a traditional long-term care insurance is a more economical choice.
Comprehensive life insurance policy vs. traditional long-term care insurance
Compared with traditional long-term care insurance products, these two types of comprehensive life insurance policy products have advantages.
First of all, the premium of a comprehensive insurance policy is usually constant, or a large sum of premiums are paid at once, so that there will be no half-way increase in premiums, or the need to pay premiums for a lifetime.And some traditional long-term care insurance policies usually have to pay continuously.
Second, if there is no long-term care expenditure, a comprehensive insurance policy will still pay a death benefit.With traditional long-term care insurance, if long-term care is not required, it is equivalent to paying for nothing.
Finally, long-term care planning is very important, and there are many corresponding options in the US market.Traditional long-term care insurance still plays an important role in helping the public pay for long-term care expenses.But with the emergence of life insurance with additional ADB clauses and clause 7702(b), traditional long-term care insurance is no longer the only option.
(Copyright © ️ Author: Jamie Hopkins, retired professor of American research institute, Peking Forbes article for the column)
