New Guaranteed Death Benefit IUL with Killer Chronic Illness Rider

                To learn more about the unique product you’ll read about in this newsletter, click on the following link:

If you like new sales ideas, you are going to like this newsletter. The twist to buying a guaranteed death benefit is really cool.

Who uses guaranteed DB policies? Those who want to make sure a DB will pass to their heirs.

What is the cheapest way to buy a guaranteed DB? Universal life policies that carry very little or no cash.

How do you normally pick a UL policy with a guaranteed DB? With price; the company with the lower premium usually wins (until now!).

What is a Living Benefit Rider (LBR)-the main LBR that everyone has been focusing on is the chronic illness rider. What is that? It’s a rider that kicks in if an insured can’t perform 2 of 6 ADLs (activities of daily living) or has a severe cognitive impairment.

Chronic illness riders pay a portion of the DB early (tax-free) while the client is living to pay for Long-Term Care (LTC) expenses.

A new twist to chronic illness riders-the following are what make up the most unique/beneficial chronic illness rider in the industry.

1) When you are on claim your premium is waived.
2) Acceleration of benefits dollar to dollar (accelerate the entire DB). Most riders will only pay up to 60% of the death benefit (and it’s an indemnity payment, which is great).
3) Actual costs of the policy are waived when on claim.
4) The policy can’t lapse while on claim.
5) If the insured goes on claim for 25 consecutive months, the policy is paid up FOREVER, even if the client is cured of what ails him/her.

It’s the last one that opens up a world of possibilities to reducing annual premiums.

What are the chances that someone who lives to 90 or 95 will have significant LTC issues? 80% or higher depending on the statistics you read. If we agree that a high majority of clients will go on claim for 25+ months as the reach age 90-95, then tell me what you think about the following:

Stopping the guarantee at age 90-95-the sales pitch to the client will be simple. You can pay X for a guaranteed DB policy or you can pay X minus. Which would you prefer? 100% of clients will want to pay X minus because it’s cheaper.

How can we do that? Let’s look at an example. Let’s start by taking a 55-year old male who is in good health who wants a guaranteed $1,000,000 DB. I’m going to compare the annual premiums of one of the more frequently used policies in the market (AIG) to the company that has a new twist on the chronic illness rider.

-AIG                                                                  $11,442
-Product with new chronic illness rider    $11,820

What if we add the chronic illness rider?

-AIG annual cost                                            $13,095 ($1,653 a year more)
-Product with new chronic illness rider   $13,529 ($1,709 a year more)

The above are premiums with a guarantee until age 100.

With the new twist policy, if the client goes on claim (can’t perform 2 of 6 ADLs) at age 90 let’s say for 25 months, the premium is waived for the rest of the client’s life (as well as when he was on claim).

Are you following me on this? If the statistics say that most people will go on claim for 25 months by the time they reach 90 or 95, then we can design a policy where the guarantee runs out at age 90 or 95. How does that affect the premiums?

-Product w/ new chronic illness rider guaranteed until age 95     = $12,940 (4.5% less expensive)

-Product w /new chronic illness rider guaranteed until age 90     = $12,094 (10.6% less expensive)

Using the NEW IUL to mitigate the risk

The above policies are products that carry very little cash. The company with this best in class chronic illness rider now has an IUL version. Let’s look at the premiums for the same client for a 100% guaranteed policy, then one guaranteed until age 90, and then 95.

-Guaranteed to age 100               $14,955
-Guaranteed to age 95                  $13,495
-Guaranteed to age 90                  $11,802

With the IUL, it’s designed to carry/build cash. Therefore, it builds wiggle room in should the client not go on claim before death.

What’s my point? My point is that if my example client buys the IUL and the guarantee is until age 90, the premium ($11,802) is significantly less than the premium for the non-IUL version ($13,529 ) that is guaranteed until age 100.

This is a design you can use to beat other agents in a competitive situation and a design that can be much less expensive for clients over the long term.

My point is that no matter if you use the IUL or not, using a policy that has a 100% waiver of premium FOREVER should the client go on claim and one that gives the client access to 100% of the death benefit while living is something that ALL advisors who sell life insurance for DB should learn about.

Roccy DeFrancesco, JD
Strategic Marketing Partners