Norse Blazzard says producers should consider using variable universal life insurance as an alternative to long term care insurance.[@@]
Blazzard, a principal at the law firm of Blazzard, Grodd & Hasenauer P.C., Fort Lauderdale, Fla., spoke here at the annual meeting of the National Association of Variable Annuities, Falls Church, Va.
Cary Lackenbach, president of Actuarial Strategies Inc., Bloomfield, Conn., has been developing the product but was unable to speak at the NAVA meeting.
Blazzard, NAVA founder, filled in with a review of ideas for advisors who might be looking for an alternative to traditional LTC insurance.
Traditionally, registered representatives and other producers have seen variable annuities as the primary alternatives to LTC insurance, Blazzard said.
Many reps, especially in bank channels, have the authority to complete annuity sales on the spot, and they may not feel that they understand VUL underwriting procedures, Blazzard said.
In addition, Blazzard said, reps who do understand VUL underwriting may worry about the prospect of having to give clients who fail medical tests the bad news.
But Blazzard noted that using variable annuities to fund long term care could lead to big tax bills for clients in high tax brackets.
Clients who are healthy enough to qualify for VUL policies can use policy loans to fund long term care with tax-favored distribution streams, Blazzard said.
When clients are lucky enough not to need long term care, the VUL policies can pass tax-free death benefits on to heirs, Blazzard said.
One risk of using VUL policy loans to fund long term care is lapsation, but clients can avoid contract implosion by creating an over-loan provision through use of a life insurance rider, Blazzard said.
When triggered, the over-loan provision can create a form of nonforfeiture status, according to a slide that Lackenbach prepared.
The loan itself can be used to fund long term care needs without requiring policyholders to have the kinds of limitations they usually must have to qualify for LTC insurance benefits, Blazzard said.