Accelerated Benefit Rider for Chronic Illness ( ABR-C)

 

Here is a description of a good alternative to traditional long term care insurance from one of our top carriers.

The Accelerated Benefit Rider for Chronic Illness is automatically included at issue for no additional premium on all applicable policies. The rider pays benefits only if/when the policyowner elects to accelerate the Death Benefit as described here and in the Rider Forms.

The Accelerated Benefit Rider – Chronic Illness (ABR-C) allows the policyowner to accelerate a portion of the Death Benefit if the base insured is chronically ill. The benefit can be used for expenses such as nursing home or home health care. (The ABR-C is not available on term products. Also, the ABR-C is not available on policies with medical flat extras or policies rated higher than Table D. The maximum issue age for the ABR-C is 80.)

In order to qualify for benefits, a physician must certify that the insured is either chronically or terminally ill. The diagnosing physician must be a licensed medical doctor or licensed doctor of osteopathy operating within the scope of the license. A physician cannot be the insured, the policyowner, or a member of their immediate family (spouse, children, siblings, parents, grandparents, or any of their spouses).

The Company may require a second opinion by a physician the Company designates. If there is disagreement between the first physician and the second physician, a third medical opinion will be provided by a physician that is chosen through a mutual agreement between the policyowner and the Company. The Company will pay for any additional medical opinions.

A physician must certify within the last 12 months that the insured is chronically ill. This medical certification is valid for 12 months. The insured is considered to be chronically ill if he or she:

• Is permanently unable to perform, for at least 90 consecutive days, at least two Activities of Daily Living (ADLs); OR

• Suffers from severe cognitive impairment.

The Activities of Daily Living are bathing, continence, dressing, eating, toileting, and transferring.

Severe cognitive impairment is defined as deterioration or loss of intellectual capacity that impairs the following items:

• Short-term or long-term memory; OR

• Orientation to people places or time; OR

• Deductive or abstract reasoning.

 

To elect benefits under these riders, the policyowner must complete an Application for Election of Accelerated Benefits, which includes the medical certification mentioned above. The Application for Election also allows the policyowner to choose the amount of the Death Benefit to accelerate, subject to the Maximum Election listed below.

Under the ABR-C the policyowner must indicate the desired payment frequency: one lump-sum payment; two payments (once every six months); four payments (once every three months); or 12 payments (once every month). The lump-sum payment is the default. A new Application for Election must be completed for each election.

The maximum Death Benefit that can be accelerated for any policy is $1,000,000.

Under the ABR-C, the maximum Death Benefit that can be accelerated for each election is 24% of the Death Benefit on the Initial Election Date, or $240,000, if smaller.

For the ABR-C, a Final Election occurs if all of the available Death Benefit in the policy is accelerated, excluding the Residual Death Benefit. The Residual Death Benefit is equal to 5% of the Death Benefit on the Initial Election Date, or $10,000 if greater.

Since the Accelerated Death Benefit is paid prior to death, the payment received by the policyowner will be less than the amount accelerated.

For the ABR-C, the payment is discounted based on current interest rates, age at election, Death Benefit and Fund Value at election, and the expected mortality for the chronically ill.

The death benefit will be reduced by the amount of the death benefit accelerated. Since benefits are paid prior to death, a discount will be applied to the death benefit accelerated. As a result, the actual amount received will be less than the amount of the death benefit accelerated.

The Net Payment received will be reduced by the administrative fee, which is a maximum of $200, and the Debt Repayment Amount, described below. The administrative fee is applied for each election. The amount of the administrative fee may vary by jurisdiction.

Under the ABR-C, monthly deductions will be waived while benefits are being paid. Monthly deductions are also waived following a Final Election.

The Death Benefit, Specified Amount and Fund Value will all be reduced in proportion to the Death Benefit that is accelerated. For example, if the Death Benefit before election is $100,000 and the accelerated Death Benefit is $20,000, the Death Benefit, Specified Amount and Fund Value will all be reduced by 20% ($20,000/$100,000).

If the policy has a loan balance, a portion of the Accelerated Benefit payment will be used to reduce the policy debt. The policy debt will be reduced by the proportion of the Death Benefit accelerated. This amount is known as the Debt Repayment Amount. As mentioned above, the Debt Repayment Amount is subtracted from the Gross Payment made to the policyowner. (Back to IUL Table of Contents)