New Wrinkle On Guaranteed Purchase Options: Offer It For LTCs

The LTC policy purchased with the rider will provide “meaningful” coverage, Brown contends, noting it will include both nursing home and home health care benefits, as well as MetLife care management services (needs analysis, consultation, etc.).

Guaranteed renewable and written at attained age rates, it can be structured with any daily benefit level up to the maximum selected in the rider. (Currently, the rider offers two maximums–$110 or $200 a day–payable for three years.) The rider maximum rises by option date.

Issue ages are 18 to 55, but the target market is 20 to 50–”the age group thats still under-penetrated for LTC insurance,” according to Brown.

Underwriting should go smoothly, she says, because “very few people under age 60 qualify for life insurance but not for LTC insurance.”

Even so, the insurer has taken precautions to protect against adverse results. For instance, the application asks three yes-no LTC questions–such as, do you have a progressive neurological disorder or a mental-nervous disease?–in addition to the life underwriting questions. And, to avoid anti-selection, Met has set the cut-off date for exercising the option at age 60–a “conservative” limit, according to Brown.

There is a cost for the rider, Brown concedes, but says “the premium equals only 1% to 3% of the cost for a participating whole life policy, and less than 10% of the cost for a 20-year term policy.”

Example: A 40-year-old man, rated preferred nonsmoker, with a $250,000 variable universal life policy that has a minimum premium of $1,800 a year, would pay $64 a year for an LTC GPO rider with a $110 daily benefit. If this man elects the $200 daily benefit, the rider would cost $116 a year.

Brown says those prices mean younger people “can cost-efficiently cover this risk (of being uninsurable for LTC later on) without having to pay for the coverage” until theyre ready.

Distribution will initially go through the MetLife Financial Services channel (agents) and later to all other MetLife channels, Brown says.

It should appeal especially to life producers who have not sold much LTC, she says, noting it gets them “thinking and talking about LTC without having to deal with ponderous LTC issues” like underwriting and features.

Met expects some agents will refer the actual LTC sale to a MetLife LTC specialist, possibly sharing commissions. But others may learn more about LTC so they can make the sale themselves and take the commission. (Note: LTCs sold via the rider pay full commissions.)

Does the rider pay a commission? Yes, a small one, says Brown. “But the motivation to sell this is not commissions,” she stresses. “The motivation is life cycle planning. It offers producers a way to keep a customer for life.”

Reproduced from National Underwriter Life & Health/Financial Services Edition, August 13, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

Copyright 2001 by The National Underwriter Company. All rights reserved. Contact Webmaster