May 9, 2013 by Randy Timm
It’s a fact that Americans are living longer. As a result, more Americans are facing health concerns as they age. In fact, 70% of individuals will require long-term care services at some point in their life.1
Despite the increased number of people in need of long-term care services, only 10% of aging Americans own private long-term care insurance.2 TWhy his small percentage could be because people don’t want to pay a premium for coverage they may never use.
To help address this concern, Aviva USA recently released the new TargetBenefitSM Annuity with optional TargetPaySM and TargetPaySM Plus income riders. Both riders offer a Confinement Income Benefit3 that will triple the income benefit for up to 60 months in the event your client is confined to a qualifying care facility.
Here’s how it works.
John and Mary, both 70, have been retired for several years. Recently, they attended a dinner with their long-time friends, the Johnsons. During dinner, John and Mary discovered that the Johnsons had purchased a fixed indexed annuity to help supplement their retirement income. Their fixed indexed annuity helped provide them with several benefits, including income payments for life.
The next morning John and Mary discussed what they learned from the Johnsons. They found that each was interested in learning more. That day, John made an appointment to visit with their financial professional, Frank.
During their office visit, Frank asks John and Mary several questions about their current situation. Frank learns that they have $500,000 to purchase an annuity. He also learns that one of their key objectives is to create an immediate stream of income.
Together, they discuss potential options. John and Mary decide to purchase the TargetBenefit10SM fixed indexed annuity. They also elect to add the TargetPaySM Income Benefit Rider to the annuity for an additional cost. At the time they turn on joint income under the terms of the rider, John and Mary receive annual income payments in the amount of $25,640.4
John and Mary continue to receive their annual payments for the next three years. Unfortunately, in the fourth contract year, John becomes ill and must enter a nursing home to receive skilled care. After John has been admitted to the nursing home, Mary calls Frank to discuss their finances. Frank reminds Mary that they have access to a Confinement Income Benefit through the TargetPaySM Income Benefit Rider they elected to add to their TargetBenefitSM fixed indexed annuity. After 180 days of confinement within a 250 consecutive day period, Mary can submit proof of confinement to receive an increased benefit.
John’s condition does not get better and he remains under skilled care in the nursing home for the necessary 180-day period. Mary submits proof of John’s confinement. Shortly after, John and Mary’s annual joint payout increases by three times to $76,920. Mary uses this money to offset the nursing home expenses she incurs over the next three years (36 months), until John passes away.
After John’s death, Mary’s annual lifetime income payment returns to $25,640 and is guaranteed for the remainder of her life.
You can download a sample Statement of Benefits here. To learn how you can offer TargetBenefitSM fixed indexed annuity and TargetPaySM Income Benefit Rider to your clients, call Sales Support at 800.362.1097.
1 U.S. Department of Health and Human Services. (n.d.). Longtermcare.gov. Retrieved from http://longtermcare.gov/the-basics/who-needs-care/
2the National Bureau of Economic Research: The Market for Long-Term Care Insurance. Retrieved from http://www.nber.org/bah/winter05/w10989.html
3 Once released from the qualified care facility, the rider income will adjust back to the original level. The Confinement Income Benefit will cease upon reaching the Extended Income Guarantee Phase or after a period of 60 months, whichever occurs first. The Confinement Income Benefit is not available in all states.
4Assuming no excess withdrawals are taken.
TargetBenefit 10 Annuity [TBS10 (09/12)], TargetBenefit 10 Select [TBS10 (09/12) NB], TargetPay Income Benefit Rider [TBSIRF (09/12)], TargetPay Plus Income Benefit Rider [TBSIRI (09/12)] or state variations are issued by Aviva Life and Annuity Company, West Des Moines, IA. Product features, limitations and availability vary by state; see the Certificate of Disclosure for details.
Annuities are not FDIC insured; guarantees provided by annuities are subject to the financial strength of the issuing insurance company.