1. Understanding the Different Types of LTC/Chronic Illness ABRs
Presented by…
Policies issued by American General Life Insurance Company, a member company of AIG

2. Defining the Chronic Care/LTC Landscape Today Life Insurance Solutions
Agenda
Defining the Chronic Care/LTC Landscape Today
Life Insurance Solutions
Long Term Care vs. Chronic Care
The 3 Types of Chronic Illness Riders
The Power of Waiver of Monthly Deductions
Care Coordination Program

3. What is a Chronic Illness?
Chronic illness care, which is also called long-term care, is needed for two reasons:
Inability to perform the activities of daily living (ADLs) bathing, continence, dressing, eating, toileting, and transferring in or out of a bed or a chair;
Needing supervision because of a cognitive impairment, such as Alzheimer’s disease or other causes of dementia.
What is a chronic illness?
Chronic illness care, which is also called long-term care, is needed for two reasons:
Inability to perform the activities of daily living, including bathing, continence, dressing, eating, toileting, and transferring in or out of a bed or a chair;
Needing supervision because of a cognitive impairment, such as Alzheimer’s disease or other causes of dementia.

4. Type of Care?
The vast majority of chronic illness care is provided at home by family caregivers, including relatives, partners, friends, and neighbors.1
According to AARP, “The ‘average’ caregiver is a 49-year-old woman who works outside the home and spends nearly 20 hours per week (which is equivalent to a half-time job) providing unpaid care to her mother for nearly five years.”1
The vast majority of chronic illness care is provided at home by family caregivers, including relatives, partners, friends, and neighbors.
According to AARP, “The ‘average’ caregiver is a 49-year-old woman who works outside the home and spends nearly 20 hours per week (which is equivalent to a half-time job) providing unpaid care to her mother for nearly five years.”
1 Feinberg L. Testimony before the Commission On Long-Term Care. “Populations in need of LTSS and service delivery issues.” AARP Public Policy Institute July 17, 2013.

5. fractures, joint replacement, broken leg, heart
Short Term
fractures, joint replacement, broken leg, heart
attack, heart failure, minor stroke, diabetes,
and complications of cancer treatment.
Some conditions that typically require short-term care include fractures, joint replacement, broken leg, heart attack, heart failure, minor stroke, diabetes, and complications of cancer treatment.

6. Short Term Conditions
Short-term care is needed for only a few days, weeks, or months.
Medicare Part A pays a significant portion of the costs via a post-acute care benefit that covers skilled nursing care.1
Average length of post-acute care ranges from a high of 36 days for home health care, to a low of 13 days for inpatient rehabilitation factilities.2
Family and friends can usually provide short-term care until recovery occurs for most conditions.
A lot of clients that are purchasing a life insurance policy have enough savings to pay for expenses not covered by Medicare or Medicare Supplement Insurance (Medigap).
1 Medicare post-acute care reforms. Statement of Mark E. Miller. Executive Director, Medicare Payment Advisory Commission. Before the Subcommittee on Health. Committee on Ways and Means. U.S. House of Representatives. June 14, 2013.
2 Medicare Payment Policy. Medpac, Medicare Payment Advisory Commission. March 2013.

7. Alzheimer’s disease, serious stroke, frailty at older ages,
Long Term
Alzheimer’s disease, serious stroke, frailty at older ages,
crippling arthritis, cancer, Parkinson’s disease, brain and
spinal cord injury, and degenerative neurologic diseases.
Long Term conditions. Alzheimer’s disease, serious stroke, frailty at older ages, crippling arthritis, cancer, Parkinson’s disease, brain and spinal cord injury, and degenerative neurologic diseases.

8. Long Term Condititions
Chronic illness care is usually needed for many months or years, and often for the remainder of life.
Chronic illness care is usually custodial, which means non-skilled personal care, such as assistance with the activities of daily living. Neither Medicare nor Medicare Supplement Insurance pay for custodial care.1
Family and friends are potentially faced with much greater demands on their time.
Many people do not have enough savings to pay for custodial care or would be more apt to insure this risk.
1 Medicare and You The official U.S. Government Medicare Handbook. U.S. Department Of Health And Human Services Centers for Medicare & Medicaid Services.

9. No one wants to think about being disabled during retirement
No one wants to think about being disabled during retirement. We imagine it will happen to “other people”. But the reality is much different. Seven in ten people who are age 65 will need chronic illness care later in life.1
No one wants to think about being disabled during retirement. We imagine it will happen to “other people”. But the reality is much different. Seven in ten people who are age 65 will need chronic illness care later in life.
1 11/14/2014

10. The vast majority of people – four in five (80%) – live in private homes where about 80 percent of the care is provided by family and friends.1 This is true even for Alzheimer’s disease. Seven in ten (70%) of people with Alzheimer’s disease and other dementias live at home.2
The vast majority of people – four in five (80%) – live in private homes where about 80 percent of the care is provided by family and friends. This is true even for Alzheimer’s disease. Seven in ten (70%) of people with Alzheimer’s disease and other dementias live at home.
1 Congressional Budget Office “Rising Demand for Long-Term Services and Supports for Elderly People” June 2013
2 11/14/2014
3 11/14/2014

11. So What Can We Do?
Some of the best advice is provided by the Administration on Aging, an agency of the United States Department of Health and Human Services that is charged with maximizing the independence and health of older adults and their families and caregivers.1
“For many, a blended approach to long-term care works best. Most consumers want to remain in their homes for as long as possible and delay facility care until they need it. Plan early and look for flexible options that give you more say.”2
Some of the best advice is provided by the Administration on Aging, an agency of the United States Department of Health and Human Services that is charged with maximizing the independence and health of older adults and their families and caregivers.
“For many, a blended approach to long-term care works best. Most consumers want to remain in their homes for as long as possible and delay facility care until they need it. Plan early and look for flexible options that give you more say.”
1 11/14/2014
2 11/14/2014

12. Typical Long-Term Care Product
With the typical long-term care product, clients pay a premium and receive benefits if qualified expenses occur.
LTC contracts utilize the 2 of 6 ADLs or Severe Cognitive Impairment as a benefit trigger.
One requirement is that the condition is expected to last at least 90 days.
LTC contracts do require the producer to have both an A&H license as well as meet the LTC education and certification requirements in their state.
With the typical long-term care product, clients pay a premium and receive benefits if qualified expenses occur.
LTC contracts utilize the 2 of 6 ADLs or Severe Cognitive Impairment as a benefit trigger.
One requirement is that the condition is expected to last at least 90 days.
LTC contracts do require the producer to have both an A&H license as well as meet the LTC education and certification requirements in their state.

13. Factors Impacting LTC Markets
Consumers are more hesitant about paying for a product they may not use especially with a budget limit.
Use it or lose it nature
Rising life expectancy and health care cost
Consumers are living longer and are more likely to use long-term care.
Long-term care costs are rising along with medical care. Average annualized increase of US nursing home costs from 1994 to 2011 is 3.95%.*
Insurers need a 10-15% increase in premiums to offset every 1% decline in long-term interest rates. Some insurers drop benefits to keep the same premiums.
Prolonged low interest rate environment
*LIMRA, U.S. Individual LTC Insurance, 2Q 2013

14. Life Insurance Solutions

15. Life Combination Products
Life products with chronic/LTC benefits
Linked Benefit Life Insurance
Life Insurance with LTC Rider
Life Insurance with Chronic Illness Rider
UL-LTC products, structured as a real LTC; usually have a low death benefit and a high LTC benefit
Life Insurance with Accelerated Death Benefit for Long Term Care
Life Insurance with Accelerated Death Benefit for Chronic Illness
Governed under IRC Code 7702(b), require health insurance
license to sell
Most Governed
under IRC 101(g)

16. Reimbursement vs. Indemnity
Reimbursement products provide a benefit if the client meets the requirements of the policy and spends money on a qualified service.
The benefit of a reimbursement product is that clients receive a benefit equal to their total cost, up to a predetermined maximum.
Also issues with ILIT owned contracts
Indemnity
Indemnity products are those that provide clients with a benefit once they meet the requirements of their policy.
The benefit of an indemnity product is that it does not require clients to receive services in a care facility. Therefore, the client can use the benefit to pay medical or non-medical expenses, or to enhance their savings.
Reimbursement vs. Indemnity
Reimbursement
Reimbursement products provide a benefit if the client meets the requirements of the policy and spends money on a
qualified service.
The benefit of a reimbursement product is that clients receive a benefit equal to their total cost, up to a predetermined
maximum.
The downside is that the client does not receive income unless the insurance carrier specifies the service as eligible for
Reimbursement. Therefore, a client could purchase this product and never see any benefit.
Indemnity
Indemnity products are those that provide clients with a benefit once they meet the requirements of their policy.
The benefit of an indemnity product is that it does not require clients to receive services to receive income. Therefore, the client can use the benefit to pay medical or non-medical expenses, or to enhance their savings.

17. Long Term Care vs. Chronic Care

18. Chronic Illness vs. Long Term Care Riders
Benefit comparisons
Feature
Chronic Illness
LTC
Diagnosis
Severe cognitive impairment or unable to perform 2+ ADLs
Severe Cognitive impairment or unable to perform 2+ ADLs
Duration
Some require condition to be permanent and some do not
At least 90 days
Payment types
Indemnity
Reimbursement or Indemnity
Benefit types
Face amount acceleration
Face amount acceleration & Extension
Benefit payments
Tax favored if meet per diem requirements (Current $360 per day)
Amount above IRS limits are not taxable if reimbursement
Other features
May waive policy monthly deductions while on claim
Can have inflation adjustment
Distribution
Life Agents can sell
Requires A&H License & LTC certification 18

19. Chronic Care vs. Long-Term Care
Use Section 101(g) only
Use Section 101(g) & 7702(b)
Pays only after permanent diagnosis for most riders
Pays for both temporary or permanent diagnosis
Amount above IRS limits are taxable
Amount above IRS limits are not taxable if reimbursement
Possible waiver of ALL policy deductions while on claim
LIMITED to NO waiver of deductions available while on claim
Some LTC carriers MIGHT waive the cost of the rider, but none waive the base too
For both Chronic Care and LTC the Licensed Health Care Practitioner
determines qualification it is not the insurance carrier

20. Life Combination Products
Life products with chronic/LTC benefits
Discounted Death Benefit
(No Upfront Cost)
Linked Benefit Life Insurance
Life Insurance with LTC Rider
Life Insurance with Chronic Illness Rider
Lien Method
(No Upfront Cost)
UL-LTC products, structured as a real LTC; usually have a low death benefit and a high LTC benefit
Life Insurance with Accelerated Death Benefit for Long Term Care
Life Insurance with Accelerated Death Benefit for Chronic Illness
Pay me now or pay me later.
Dollar for Dollar Death Benefit
(Upfront Cost)
Governed under IRC 7702B code, require health insurance
license to sell
Governed under IRC 101(g) code

21. Let’s begin with these three questions –
Do I have to pay upfront?
Do I know the monthly benefit I can get when I’m on claim?
How much of my death benefit can I receive?
Discounted Death Benefit No Upfront Cost

22. Discounted Death Benefit (No Upfront Cost)

23. Discounted Death Benefit Basics
Clients can accelerate all or part of their death benefit in the event of a Critical, Chronic or Terminal Illness depending on the carrier
No-cost accelerated benefit payout and what the client receives is based on change in life expectancy after diagnosis of a covered illness or some other discount calculation (varies by carrier)
No additional underwriting
Significantly shorter life expectancy = larger payout
Moderately impacted life expectancy = smaller payout
Depending on the carrier clients may accelerate up to 100% of the policy death benefit up to a lifetime maximum
Clients can accelerate all or part of their death benefit in the event of a Critical, Chronic or Terminal Illness
No-cost accelerated benefit payout the client receives is based on change in life expectancy after diagnosis of a covered illness
No additional underwriting
Significantly shorter life expectancy = larger payout
Moderately impacted life expectancy = smaller payout
Depending on the carrier clients may accelerate up to 100% of the policy death benefit up to a lifetime maximum

24. Discounted Death Benefit ABR –
Henry purchases a $250,000 …Insurance product at age 40
Ten years later, at age 50, he suffers a stroke and is unable to perform 2 of 6 ADL’s his prognosis for recovery is not good.
The medical costs associated with this event are substantial. To help cover these expenses, Henry decides to accelerate $50,000 of his $250,000 policy.
Henry purchases a $250,000 insurance product at age 40, which automatically includes the Flexible Accelerated Benefit Rider.
Ten years later, at age 50, he suffers a stroke and his prognosis for recovery is not good.
The medical costs associated with this event are substantial. To help cover these expenses, Henry decides to accelerate $50,000 of his $250,000 policy.
Not an actual case, and is a hypothetical representation for illustrative purposes only. 24

25. Henry’s Accelerated Benefit
When Henry files the claim, the company determines his benefit and makes an offer based on the severity of his condition and how it will affect his life expectancy.
Henry receives an offer from the company for $22,444.
He could elect to take all, part or none of the accelerated benefit amount.
If Henry’s stroke had been more severe, the offer would have been higher.
Henry accepts the offer, and his death benefit is reduced by the full amount he accelerated - $50,000.
His remaining death benefit of $200,000 remains intact.
Henry can accelerate this money if he has a future event, or it will pass to his beneficiaries when he dies.
When Henry files the claim, the company determines his benefit and makes an offer based on the severity of his condition and how it will affect his life expectancy. Henry receives an offer from the company for $22,444. He could elect to take all, part or none of the accelerated benefit amount. If Henry’s stroke had been more severe, the offer would have been higher. Henry accepts the offer, and his death benefit is reduced by the full amount he accelerated - $50, His remaining death benefit of $200,000 remains intact. Henry can accelerate this money if he has a future event, or it will pass to his beneficiaries when he dies.
Not an actual case, and is a hypothetical representation for illustrative purposes only. 25

26. Lien Method (No Upfront Cost)
Dollar for Dollar Death Benefit with Lien (No Upfront Cost)

27. No additional underwriting Less than 100% of the death benefit
Lien Method
No charge until used
No additional underwriting
Less than 100% of the death benefit
Benefits accrue with interest
Only charged interest if you use it
Lien Method – these riders do not charge for the accelerated benefit until used and generally do not require additional underwriting.  These riders allow the acceleration of less than 100% of the death benefit.  The benefits paid are accrued with interest and this balance is used to offset the death benefit upon actual death. 

28. Lien approach ABR Hypothetical Case Study
Mr. Able at age 50 purchases a $500,000 life insurance policy with a lien method chronic illness acceleration rider, paying $4,666 for lifetime coverage
Twenty years later, at age 70, he suffers a stroke and is unable to perform two of six ADL’s…prognosis for recovery is not good.
The medical costs associated with this event are substantial. To help cover these expenses, he decides to accelerate $250,000 of his $500,000 policy.
At the time, the cash value = $52,755, and the acceleration factor is 50%, and lien interest rate is 5.5%
The eligible amount to accelerate =
50% * (500,000 – 52,755) + 52,755= $276,000
He’s eligible to accelerate the requested $250,000 in the form of a lien
Not an actual case, and is a hypothetical
representation for illustrative purposes only. 28

29. Lien Approach ABR Hypothetical Case Study continued
Upon claim, the net death benefit available upon death = $500,000 – lien of $250,000 = $250,000
The net cash value available is zero since the lien exceeds the cash value, $250,000 > $52,755
In 10 years, the Lien has grown to $427,036, the net death benefit available upon death = $500,000 - $427,036 = $72,964
The premium of $4,666 must continue to be paid to keep the policy in force
In 3 more years (policy year 33), the policy will lapse because the lien will exceed the original face amount of $500,000
Not an actual case, and is a hypothetical
representation for illustrative purposes only. 29

30. Dollar for Dollar Death Benefit (Upfront Cost)
Dollar for Dollar Death Benefit (No Upfront Cost)
Freedom of choice.

31. Accelerated Access Solution®
Let’s talk about the Accelerated Access Solution as a way to protect your assets from the costs of caring for Chronic Illnesses.

32. Accelerated Access Solution
101(g)
No LTC license necessary
2-out-of-6 ADLs; or Severe Cognitive Impairment
No Longer Required to be Permanent*
Indemnity Benefit
No Receipts
Spend benefits on anything
Flexible Benefit Base
Benefit = 50% up to 100% of Death Benefit
$50,000 minimum up to $3,000,000 maximum
Full waiver of monthly deductions
Let’s look at some of the benefits of the Accelerated Access Solution.
Accelerated Access was filed as a rider under IRC section 101(g). That primarily means that:
No LTC license is required for you to be able to sell the Accelerated Access Solution as part of an AG Secure Lifetime GUL II policy. Your Life Insurance and Accident & Health licensing is all that’s necessary from a licensing standpoint.
It also means that the primary triggers for Chronic Illness benefits are either (1) inability to perform 2-out-of-6 Activities of Daily Living (ADL’s); or (2) severe cognitive impairment.
The benefit was filed as an Indemnity benefit. That’s completely different than the alternative – the Reimbursement benefit. With Reimbursement, you must file a claim and provide copies of all invoices. Your claim is reviewed and, eventually, you receive a reimbursement in an amount the insurance company deems appropriate based on your receipts. With American General Life’s Indemnity version, you don’t need to provide an receipts or file any claims regarding your treatments. American General Life will send your benefit checks every month, regardless of whether you’ve incurred any costs at all, and regardless of what those costs were. You meet the criteria for ADLs or severe cognitive impairment, file your claim and satisfy the 90-day waiting period, and American General Life begins sending the checks.
*Connecticut Chronic Illness Accelerated Death Benefit Rider Requirements ( )
Chronic Illness in the state of Connecticut is defined as the insured being certified, within the previous12 months, as suffering a medically determinable condition which results in their being considered unable to perform 2 of 6 Activities of Daily Living, or requiring substantial supervision. Further, as a result of this condition, the insured must have been confined for at least six months in their place of residence or in an institution that provides necessary care or treatment of an injury, illness or loss of functional capacity. Finally, it must have been medically determined that the insured person is expected to remain confined in such place of residence or institution until death. 32

33. Flexible Monthly Benefit
Accelerated Access Solution
Flexible Monthly Benefit
IRS Per Diem capped at 2% per month
IRS Per Diem capped at 4% per month
IRS Per Diem with No Cap!
Max. Monthly Benefit = Total Benefit ÷ 12
Monthly benefit: American General Life will always pay up to the maximum IRS monthly Per Diem benefit, but you have a choice of three different caps on the maximum monthly benefit American General Life will pay.
2% of the AAS Benefit Base. With this option, if you had an Accelerated Access Solution aggregate benefit of $500,000, your monthly maximum benefit would be the lesser of: (a) the IRS monthly Per Diem; or (b) $10,000 per month.
4% of the AAS Benefit Base. With this option, if you had an Accelerated Access Solution aggregate benefit of $500,000, your monthly maximum benefit would be the lesser of: (a) the IRS monthly Per Diem; or (b) $20,000 per month.
If you don’t choose to cap your monthly benefit at 2% or 4%, and assuming the same aggregate $500,000 Accelerated Access Solution benefit, the maximum monthly benefit will be the lesser of: (a) the IRS monthly Per Diem; or (b) $500,000 divided by 12 months = $41,666 per month.
So, choose your aggregate benefit, and your monthly cap, and you’ll be ready to go!
IRS caps the maximum daily rate each year. The 2017 maximum is $360/day or $10,950 month. Subsequent years may be higher. 33

34. Accelerated Access Solution
Inflation hedge against future costs
Purchase more than today’s Per Diem limit
Many products won’t allow it
Provides inflation protection with a maximum monthly benefit cap
4% Cap – example:
4% of $300,000 = $12,000 per month
Go on-claim in 2017: Collect $10,950 per month
Go on-claim in the future when Per Diem = $15,000 per month: Collect $12,000 per month
Per Diem – example:
$300,000 AAS benefit
Maximum monthly benefit: $300,000 = $15,000 per month
For clarification, here are a few more examples.
With Accelerated Access Solution you can actually purchase more than today’s Per Diem limit.
There are products on the market that won’t let you purchase a benefit in excess of the current year’s Per Diem limit, which means your benefit will never go up, regardless of an increasing, inflation adjusted Per Diem.
Because AIG allows you to purchase an aggregate amount and a monthly benefit amount in excess of the current Per Diem, the outcome is very simple. At lower Per Diem amounts you get less per month, but for more months. At higher Per Diem amounts you get more per month, but for fewer months.
Let’s look at another example using a 4% cap. If you purchased a $300,000 Accelerated Access Solution benefit, your maximum monthly benefit would be $12,000. Accelerating $12,000 per month would be able to continue for 25 months ($300,000 ÷ 12 = $25)
If you went on-claim in 2017 you’ wouldn’t receive the entire $12,000 per month. The IRS Per Diem would limit you to $10,950 per month, which would last for 30 months.
And, if you went on claim when the IRS Per Diem was $15,000, American General would limit your monthly benefit to your capped amount of $12,000 per month.
Lastly, if you did not choose a 2% or 4% cap, then your maximum monthly benefit is your total benefit divided by 12. In this example, $300,000 ÷ 12 = $25,000 per month.
Naturally, if the Per Diem amount is less than $25,000 per month, you’ll receive the Per Diem in effect when you began your claim. 34

35. Care Coordination Program

36. Care Coordination Program
AGL offers services to help the insured locate and choose a provider through its “Care Coordination Program”. American General Life has partnered with the nation’s largest administrator of long-term care insurance (Long-Term Care Group, Inc. or LTCG™), to arrange the long-term care services at no cost to policyholders. This free benefit, called the “Care Coordination Program”, is completely optional and available on all policies with the Accelerated Access Solution chronic illness rider.

37. Care Coordination Program
This program offers access to Care Management professionals that can provide information to support a search for a caregiver or facility that is right for each family’s situation as well as assistance to:
locate a qualified caregiver, long term care facility or home-delivered meals provider
develop a plan of care to ensure all your needs are met
direct you to organizations with expertise in your disabling condition
set up your first home care visit
understand the steps involved in moving into a long term care facility
help you understand the cost of long term care and how you will be billed for the services you receive

38. Important Information
Policies issued by: American General Life Insurance Company (AGL), Policy Form Number 15442, ICC , Rider Form Number 13972, 13600, ICC Issuing company AGL is responsible for financial obligations of insurance products and is a member of American International Group, Inc. (AIG). AGL does not solicit business in the state of New York. Products may not be available in all states and product features may vary by state. These product specifications are not intended to be all-inclusive of product information. State variations may apply. Please refer to the policy for complete details. There may be a charge for each rider selected. See the rider for details regarding the benefit descriptions, limitations and exclusions.
Guarantees are backed by the claims-paying ability of the issuing insurance company.
AGLC108204
©2016. All rights reserved.
Here are some important notes about products and riders we’ve discussed, as well as information about AIG.
At American General Life we hope to continue to provide you with the products, the people and the services that have become the hallmark of American General Life a member of AIG.

39. American International Group, Inc
American International Group, Inc. (AIG) is a leading international insurance organization serving customers in more than 130 countries.. AIG companies serve commercial, institutional, and individual customers through one of the most extensive worldwide property-casualty networks of any insurer. In addition, AIG companies are leading providers of life insurance and retirement services in the United States. AIG common stock is listed on the New York Stock Exchange and the Tokyo Stock Exchange.
Additional information about AIG can be found at | YouTube: | | LinkedIn:
AIG is the marketing name for the worldwide property-casualty, life and retirement, and general insurance operations of American International Group, Inc. For additional information, please visit our website at All products and services are written or provided by subsidiaries or affiliates of American International Group, Inc. Products or services may not be available in all countries, and coverage is subject to actual policy language. Non-insurance products and services may be provided by independent third parties. Certain property-casualty coverages may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds, and insureds are therefore not protected by such funds.