1. Understanding the Differences Between Long-term Care Riders and Chronic Illness Riders
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Advanced Consulting Group of Nationwide®
Nationwide, the Nationwide N and Eagle, Nationwide is on your side and other marks displayed in this presentation are service marks of Nationwide Mutual Insurance Company or its affiliates, unless otherwise disclosed. © 2016 Nationwide

2. Some Things You Should Know
This presentation was not intended by the author to be used, by anybody for the purpose of avoiding any penalties that may be imposed on you pursuant to the Internal Revenue Code. The information contained herein was prepared to support the promotion, marketing and/or sale of life insurance contracts, annuity contracts and/or other products and services provided by Nationwide Life Insurance Company or Nationwide Life and Annuity Insurance Company.
Federal tax laws are complex and subject to change. Neither the company nor its representatives give legal or tax advice. Please talk with your attorney or tax advisor for answers to your specific questions.
Investing involves risk, including possible loss of principal
Keep in mind that as an acceleration of the death benefit, the LTC rider payout will reduce both the death benefit and cash surrender values. Care should be taken to make sure that your clients' life insurance needs continue to be met even if the rider pays out in full. There is no guarantee that the rider will cover the entire cost for all of the insured's long-term care as these vary with the needs of each insured.
NFM-9907AO.4 (06/16)
FOR BROKER/DEALER USE ONLY — NOT FOR USE WITH THE PUBLIC 2

3. Some Things You Should Know
When evaluating the purchase of a variable annuity, your clients should be aware that variable annuities are long-term investment vehicles designed for retirement purposes and will fluctuate in value; annuities have limitations; and investing involves market risk, including possible loss of principal.
This information assumes that the life insurance is not a modified endowment contract, or MEC. As long as the contract meets the non-MEC definitions of IRC Section 7702A, most distributions are taxed on a first-in/first-out basis. Surrender charges may apply to partial surrenders. Loans and partial surrenders from a MEC will generally be taxable, and if taken prior to age 59 ½, may be subject to a 10% tax penalty. Loans and partial surrenders will reduce the cash value and the death benefits payable to your beneficiaries, and withdrawals above the available free amount will incur surrender charges. If your contract were to lapse with a loan outstanding, the loan amount in excess of basis will be treated as a distribution and all or a portion will be subject to income tax.
The underlying investment options to a variable annuity or life insurance product are not publicly traded mutual funds and are not available directly for purchase by the general public. They are only available through variable annuity/variable life insurance policies issued by life insurance companies.
NFM-9907AO.4 (06/16)
FOR BROKER/DEALER USE ONLY — NOT FOR USE WITH THE PUBLIC 3

4. Some Things You Should Know
As your clients’ personal situations change (i.e., marriage, birth of a child or job promotion), so will their life insurance needs. Care should be taken to ensure these strategies and products are suitable for long-term life insurance needs. You should weigh your clients’ objectives, time horizon and risk tolerance as well as any associated costs before investing. Also, be aware that market volatility can lead to the possibility of the need for additional premium in the policy. Variable life insurance has fees and charges associated with it that include costs of insurance that vary with such characteristics of the insured as gender, health and age, underlying fund charges and expenses, and additional charges for riders that customize a policy to fit your clients’ individual needs.
Not all Nationwide products and services are suitable for all clients or situations. There may be products, issued by other companies, which better suit your clients’ goals. Be sure to consider your clients’ objectives, their need for cash flow and liquidity, and overall risk tolerance when using any strategy.
This information was developed to promote and support products and services offered by Nationwide. It should not be taken as tax advice. It was not written or meant to be used by any taxpayer to avoid tax penalties, and it cannot be used by any taxpayer for that purpose.
Life insurance and annuities are issued by Nationwide Life Insurance Company or Nationwide Life and Annuity Insurance Company, Columbus, Ohio, member of Nationwide. The general distributor for variable insurance products is Nationwide Investment Services Corporation, member FINRA.
NFM-9907AO.4 (06/16)
FOR BROKER/DEALER USE ONLY — NOT FOR USE WITH THE PUBLIC 4

5. Agenda The current LTC marketplace
The differences be between Long-term Care Riders and Chronic Illness riders
How Consumer Protection Features on LTC Riders provides a higher standard of policy protection
Today we will be discussing the following: (read slide) 5

6. Traditional LTC – Current Status
Significant premium increases on new and in-force policies
20 years of declining interest rates
Unexpected low lapse rates – about 1%1
Gender based pricing - Females twice as likely to file a claim1
Elimination of most Single pay and Short pay policies
70% of policies purchased by top 5 carriers2
There has been a significant increase in the cost of new policies as well as numerous rate increases on in-force policies. This has been necessary for several reasons. A decline in interest rates spanning over two decades has caused a need to generate additional revenue since policies were priced with the assumption that 40% to 60% of claims benefits could be paid from interest bearing investments. Add to that lapse rates that were severely underestimated. In addition, today’s society is living longer, which will increase the chances of a person going on claim, and the baby boomers are now aging into the LTC space. This cumulative effect has left a lot of carriers defeated. For the remaining carriers to survive, price increases - often substantial - have had to be implemented to create needed revenue to pay claims. The newest change in the attempt for survival is gender specific rates. With women comprising two-thirds of claims (source; AALTCI Sourcebook 2015), carriers felt it was time to pass on the added cost of that risk to females. In addition, clients have fewer options that would help insulate them from future price hikes as most carriers have eliminated single pay as well as short pay premium payment options.
Looking at the current trends in the LTC marketplace, we see there has been a sharp decrease of companies selling traditional LTC insurance. A decade ago there were around 100 companies selling LTCi, but today 70% of policies are sold by the top 5 carriers. The decline is a combination of mergers and companies leaving the industry.
According to sales tracked by LIMRA, traditional long-term care sales have lagged since Sales in 2011 and 2012 were relatively stagnant, and then LIMRA reported a sharp double digit decline in the sales of traditional LTC insurance in 2013, 2014, and 2015.
All of these challenges in the stand alone LTC marketplace has created an environment that is ripe for alternative solutions to LTC coverage. Sales provide a clue to this shift as while traditional LTC sales have plummeted, the LTC combo products have seen a consistent rise in sales.
Source: LIMRA; U.S. Individual LTC Insurance, Third Quarter Review 2014
1 American Association of Long Term Care Insurance – AALTCI Sourcebook
2 LIMRA; U.S. Individual LTC Insurance, Third Quarter Review 2015 6

7. Alternative Solutions
Riders attached to financial products have existed for many years
Not plentiful or well marketed in early years
Today, are a welcome solution to a changing LTCi marketplace
Riders fill a need that traditional LTC policies may not
Transition from family or income protection to LTC coverage
Loss of premium – “use it or lose it” objection is eliminated
Options for premium payment schedules
Ability for insurance company to offer guarantees
Premium
Benefits
Sales continue to see growth in this space1
Alternative solutions to stand alone policies have been around for many years, but the offerings were neither plentiful or marketed well in the past. But as problems starting plaguing the stand alone LTC industry, alternative solutions have been welcomed. For one thing, riders addressing LTC needs can enhance the value of the underlying financial product. For example, a life insurance policy no longer deemed necessary for family protection once the insured retires and pays off debt, etc., can now be transitioned into LTC protection.
In addition, these hybrid solutions can address objections clients have to traditional LTC policies. Loss of premium risk (“use it or lose it”) is eliminated since these products pay regardless of which direction life takes (assuming all premium obligations have been met). Options for premium payment schedules extend from single premium to life pays and pretty much anything else in between. Another feature of these products is that guaranteed policies can be purchased, guaranteeing the premium will not increase nor can the benefits be reduced or changed.
All of these features have led to an impressive growth in the popularity of hybrid products. These solutions continue to see double digit growth
1 LIMRA Individual Life Combination Products Annual Review 7

8. Life Insurance Solutions with Long-term Care and Chronic Illness Riders Understanding the Differences
Before looking at Advanced Sales applications, it is important to discuss that not all riders covering chronic illness are the same. While most LTC and Chronic Illness riders are similar in nature, there are some features that differentiate them as well. It is important to understand the differentiators as they can be very important to a client looking to make the right decision for their particular situation. 8

9. Life Insurance/Combo policies
Classification of rider determines:
How product can be marketed
Requirements needed to sell a product
How rider is charged for
How claims are paid
Effect on the base policy death benefit
First and foremost, it is very important to understand the classification a rider falls under. This classification determines how the product can be marketed, what additional requirements a financial professional may need to sell the product, how the rider is charged for, what type claims are paid, and the final effect on the base policy death benefit. 9

10. Tax Qualified Status
Claims requirement must meet IRC definition of chronic illness to pay tax-free benefits regardless of type of rider
Definition of Chronic Illness per IRC 7702B
A licensed health care practitioner must certify the insured has:
The inability to perform 2 out of 6 Activities of Daily Living, certified by a licensed health care practitioner to last least 90 days
- or -
Severe Cognitive Impairment
Definition of chronic illness is the same for both LTC Riders and Chronic Illness Riders for Federal Tax Purposes
Long-term Care riders pay all chronic illness claims, but
Chronic Illness riders may not pay all long-term care claims
Now is a good time to clarify the definition of Chronic Illness and how that definition affects claims on each of these riders. Regardless of which rider you are referring to, claims requirements must meet the IRC Section 7702B definition of chronic illness in order to pay tax-free benefits.
The definition of Chronic Illness per IRC Sec. 7702B is as follows:
A licensed health care practitioner must certify that the insured is unable to perform at least 2 out of 6 activities of daily living (bathing, dressing, eating, transferring, using the toilet, continence- or- severe cognitive impairment and that this condition will last at least 90 days. The definition of chronic illness is the same for both LTC riders and chronic Illness riders for Federal Tax Purposes.
Long-term Care riders must meet the definition of 90 days or more as shown. Chronic illness riders must also meet this 90 day requirement, but may also include a provision that requires that the condition is likely to last the rest of the insured’s life. For pricing and ease of claims, this is a condition that is often used in chronic illness rider products, so it is important to check the contract for details.
Due to these potential differences, long-term care riders will pay all chronic illness claims, but chronic illness riders may not contractually be able pay all long-term care claims. 10

11. New Regulations add to Confusion
The Interstate Compact revised standards for Chronic Illness Riders were put into force December 2014.
New standards allow Chronic Illness Riders to be filed with ability to pay temporary claims
This is an option, not a requirement
Long-term Care rider claims
Claims lasting 90 days or more
Chronic Illness rider claims
Most still require the insure be “likely to need care the rest of their life”
Some will pay for claims lasting 90 days or more
The Interstate Compact is a group comprised of most but not all states; who have agreed to a unified set of standards for approving insurance products. Effective as of December 2014, the Interstate Compact revised standards for chronic illness riders, which receive tax favored treatment as an accelerated life insurance benefit under Internal Revenue Code §101(g). The new standards now allow for approval of chronic illness riders that include the option of paying temporary chronic illness claims. Keep in mind these revised standards provide the option to include benefit triggers for temporary claims, but it is not a requirement. 11

12. Tax qualified Status “Tax Qualified” LTC Riders
Favorable federal tax treatment under IRC Section 7702B
Can be marketed as a qualified LTC contract
Covers temporary and permanent claim conditions
Majority of states have long-term care CE requirement
Some states require a health license
Riders are underwritten and charged for
Use the Dollar for Dollar reduction method
LTC benefits determined at policy issue
At least 100% of issued amount is paid regardless of when LTC claim takes place (assuming no withdrawals or loans)
Tax Qualified Status – Long term Care Riders:
To be treated as a “tax qualified long-term care rider” a rider must comply with IRC Section 7702B – or use a rare filing method that qualifies as a long-term care product – where the rider is filed with LTC Model Regulations with favorable federal tax treatment under 101(g). These riders are considered long-term care products and can be marketed as such. They will cover permanent claims you would normally associate with LTC as well as temporary type claims.
Where might this make a difference? What is a temporary claim? Serious car or motor cycle accidents; Recoverable strokes; Extensive orthopedic repairs; side effects of cancer treatments. Essentially, any chronic illness condition that will last at least 90 days and will require long term care assistance at home or in a facility, but that the insured will likely recover from at some point in time.
To sell these riders, advisors will need to comply with any LTC CE requirements for their state, as well as any requirement for a health license should that apply as well as have the licenses needed to sell the underlying base life insurance policy the rider is attached to.
The rider is underwritten for, and charged for. This results in LTC benefits being determined at policy issue – and at least 100% of the issued amount being paid regardless of when LTC claims take place. (assuming of course there are no withdrawals or loans) 12

13. What Differentiates LTC Riders?
Benefit payment modes are main differentiator
Reimbursement
Requires bills and receipts to be submitted
Reimburses only costs of qualifying care services, and only up to benefit limit
Benefit not limited to HIPAA
Indemnity
Pays full monthly benefit directly to policy owner
No bills or receipts to submit to receive monthly benefits*
Some companies require monthly re-verification of billable services
Benefits not spent on care can be used for other purposes
Benefit usually limited by some tie in to HIPAA
Cash Indemnity
Pays full monthly LTC benefit to policy owner
Insurance company places no restriction on how benefit are used
The main differentiator with 7702B LTC riders is how the LTC benefit is paid – which is either through Indemnity or Reimbursement.
With a reimbursement plan, the benefit is the lesser of LTC costs incurred or the maximum rider benefit amount. Some companies require the contract owner to submit bills and receipts each month. A few companies will allow the facility to bill the insurance company directly for payment. However, not all charges on the bill may qualify for reimbursement. And there are no excess benefits that could be used to pay for other expenses. However, these plans are usually not tied to HIPAA, and thus are willing to pay qualifying benefits in excess of HIPAA limitations.
An Indemnity-style payout on a life insurance LTC rider generally pays the full specified benefit directly to the contract owner. Keep in mind, this may or may not be the person insured. While bills or receipts may be required as part of establishing proof of claim, no bills or receipts need to be collected or submitted each month for purposes of claims reimbursement. However, some companies require monthly re-verification of billable services while on claim. Any benefits not needed to pay for licensed for care can be used for any purpose the contract owner desires. Benefits are usually tied in some manner to annual limitations established by HIPAA (Health Insurance Portability and Accountability Act).
Cash Indemnity benefits also pay full monthly benefits to the policy owner. However, the insurance company will place no restrictions on how policy benefits are spent, meaning the benefits can be used for unlicensed, informal care including care from family members.
*Bills or receipts may be needed to establish proof to initiate a claim 13

14. Tax qualified Status Chronic illness riders
Favorable federal tax treatment under IRC Section 101(g)
Strictly prohibited from being marketed as long-term care*
Most still require certification that the insured’s condition will likely last their lifetime is generally required
Interstate compact now allows new filings to cover temporary claims but most filings are still using permanent requirement
New rules do not grandfather to currently filed products
Currently, there are no CE requirements
Actuarial Methods of paying benefits vary
Some use the Dollar for Dollar reduction method
Many use the Discount Method of Lien with Interest Method
Tax Qualified Status – Chronic Illness Riders:
Chronic Illness Riders only receive favorable federal tax treatment under IRC Section 101(g) and are deemed “Accelerated Death Benefits for Chronic Illness” riders. With these products, the term “long-term care” may not be used in marketing, sales literature, or in sales presentations to clients. The term “chronic illness” must be used instead. Some states, for state purposes only, may consider these to be a LTC products, but sales and marketing must still be limited to calling them chronic illness riders. In addition, while claims are initiated by the chronic illness triggers of 2 impaired ADLs or Cognitive Impairment, most companies require that the physician must certify the chronic illness “is likely to last the rest of the insured’s life”. In other words, the condition must be non-recoverable. Conditions such as mild to moderate strokes, orthopedic repairs, physical complications from cancer recovery, and other recoverable conditions, would not be eligible for claim. For this reason, particular care should be taken when explaining these products to clients so they have a thorough understanding of any limitations in coverage. Benefits are tax free when the policy only when the policy is individually owned per Sec 101(g). The appropriate licenses are needed to sell the base life insurance product, and some states are now requiring a health license as well, but there are currently no CE requirements, due to the fact that these riders are not considered long-term care products.
The Interstate Compact now allows new filings to cover temporary claims, though most companies still choose to still use the permanent claim requirement. It is important to understand that the new ruling does NOT mean older products are automatically grandfathered into allowing temporary claims. Currently filed products must continue to process claims as the contracts were originally filed.
*Some states, for state purposes only, consider these LTC products, but for federal purposes they are not. 14

15. What Differentiates 101(g) Chronic Illness Riders?
Charge for rider
Underwritten for chronic illness risk
Monthly deductions charged
Chronic Illness benefit determined at policy issue
100% of issued amount is paid regardless of when LTC claim takes place (assuming no withdrawals or loans)
Included with the policy – benefits discounted
No underwriting*
Not “free” – Charged for at time of claim
Benefits discounted at claim or at death by actuary factors
No charge if never used
Can’t determine benefit outcome until time of claim or death
The main differentiator with 101(g) chronic illness riders is whether they charge for the rider up front, or include the rider with all policies, then discount at time of claim.
Additional charge to cost of insurance- Some Chronic Illness products assign a cost of insurance to the chronic illness rider and take monthly deductions from policy values – essentially the same way the base policy is charged for. While this does increase the premium for the overall life insurance policy, charging for the rider up front provides a client with the advantage of knowing from day one exactly what was purchased and how much chronic illness benefit they will be entitled to, no matter when the need arises. Clients wanting clarity in what they purchased may find the additional charge minimal in comparison the potential loss of benefits created by the discounting method.
Discounted Acceleration - Other companies “include” the Chronic Illness Rider feature as part of the policy at no additional charge. But keep in mind “no charge” does not equate to “free”. instead of charging for the rider as part of the cost of insurance, these riders discount either the acceleration of death benefit when the rider is actually needed, or , if the lien with interest method is used, the remaining death benefit is discounted by an interest rate after the acceleration is paid.
We will take a closer look at both these methods.
* One company underwrites the rider, but then discounts less than non-underwritten riders 15

16. Effect of the Dollar for Dollar Method
Used primarily by LTC Riders, and a few Chronic Illness Riders
Fully underwritten (may offer table ratings) and charged for
Monthly benefit amount and total benefit pool remain constant
A percentage of death benefit available each month for LTC
2% per month most common (50 month benefit)
Each dollar of benefit reduces death benefit dollar for dollar
$400,000 policy/$400,000 LTC Rider – claim in policy year 22
Claim Year
Death Benefit/LTC Beginning of Yr.
LTC Monthly Benefit
Annual LTC Payout
Total LTC Benefit Paid
Remaining Death Benefit
Cumulative Total Paid 1
$400,000
$8,000
$96,000
$304,000 2
$192,000
$208,000 3
$288,000
$112,000 4
$384,000
$16,000 5 $0
These riders are fully underwritten and some companies will even table rate the rider to allow more people to qualify. There is a charge for the rider which is based on the rating issued. Again, because the rider is underwritten and charged for, rider benefits are determined at policy issue and are always clear and defined. The full issued amount is paid no matter when a claim occurs (assuming no withdrawals or loans are taken).
This is the method most LTC Riders use. Only a few companies offering chronic illness riders use this method.
Generally, these riders work by paying a set percentage each month of the specified LTC Rider amount , which with most companies must equal the specified amount (which an advisor or client may relate to as “death benefit”). If full benefits are taken each month, the benefit period will last 50 months. If less is taken, either by choice or because the policy caps benefits based on a HIPAA limitation, the benefit period could be longer.
Each dollar paid in LTC (or chronic illness benefits) will reduce the death benefit and cash surrender value dollar for dollar. As you can see from the chart, when an insured goes on claim, the death benefit amount is reduced exactly by the amount of LTC benefit paid. In the end, the total death benefit amount issued will always be the same amount paid in total at death (again, assuming no withdrawals or loans have been taken). Some companies offer a residual death benefit if most or all benefits are paid out for LTC, thus potentially allowing the policy to pay more than the issued amount.
With this method a client will know what they have to work with for LTC benefits, and how that will affect any remaining death benefit, no matter when a claim commences. 16

17. Effect of the Discount Method
No underwriting - available to all (included with policy)
“No Charge” does not equate to free
Death benefit is discounted at time of acceleration of benefits
Age, gender, rate class, cash value, discount interest rate
Acceleration of DB not paid as Chronic Illness benefit is forfeited*
Age at Election
Death Benefit
C.I Benefit Amt Elected for Male
Death Benefit Male Forfeited
C.I Benefit Amt for Female
Death Benefit Amt. Female Forfeited 70
$100,000
$65,266
$34,734
$56,665
$43,335 75
$71,868
$28,132
$63,651
$36,349 80
$78,755
$21,245
$71,515
$28,485 85
$84,562
$15,438
$79,147
$20,853
As we discussed earlier, there are chronic illness riders offered that do not underwrite, offer the rider to most insured’s (may be limited to standard and better) and include the rider with the policy. However, “no additional charge” does not mean “free”.
Because there is no charge or underwriting, benefits cannot be determined until the time comes to go on claim. With the Discount Method, the discounting of the benefit is based on several variables including age, gender, premium class, as well as interest rates and policy cash values at time of claim.
The younger you are when filing a claim, the more the death benefit is discounted - ultimately reducing the amount of total benefits paid out. Women, with all other factors equal, will have a larger discount factor than men, and thus receive less benefit. It is important to explain to clients choosing this type plan that neither the Chronic Illness benefit amount nor the total benefit pool available can be predicted in advance, but rather, can only be determined at time of claim. While some may argue this method spares people who never experience chronic illness expenses from having to pay rider charges, those needing benefits may not understand at the time of claim why the policy death benefit is not worth what is was at policy issue. In addition, the amount not paid in the discounting is permanently forfeited. In order for full benefits to be paid without a discount, the insured will have to be in the general age range of 100.
Amounts shown in the chart are from a company offering such a policy. The formula is based on when death was supposed to occur and the risk to the company for early payment of the death benefit. The formula essentially calculates a present value benefit, thus is designed to mitigate risk for the insurance company so they are at little risk.
Note, one company providing this type product does underwrite, but then discounts less at claim time than companies with no underwriting.
* Insured must be in general range of age 100 before full benefits would likely be paid. Numbers from company issuing this type product. Assumptions are a $500,000 policy with $50,000 of cash value, 7% interest rate at election . Election is 20% of death benefit $100,000.(maximum election 24%) 17

18. Effect of Lien Method (with interest)
Years After Election
Lien with interest
Final Death Benefit
After Election
$250,000 1
$263,750
$236,250 2
$278,256
$221,744 3
$293,560
$206,440 4
$309,706
$190,294 5
$326,740
$173,260 6
$344,711
$155,289 7
$363,670
$136,330 8
$383,672
$116,328 9
$404,774
$95,226 10
$427,036
$72,964 11
$450,523
$49,477 12
$475,302
$24,698 13
$501,443
-$1,443 (terminated)
No underwriting - available to all (may be limited to certain rate classes)
No Charge does not equate to free
Lump sum benefit
Lesser of 50% of DB or $250,000
Subject to tax if exceeds IRS formula
Interest charged on acceleration
Backed by lien on remaining DB
Hypothetical example:
Policy Face Amount - $500,000
Percentage Elected – 50%
Accelerated Amount - $250,000
Paid as lump sum to policy owner
Rate for Payments – 5.50%
With the lien with interest method, there is generally no underwriting and the rider is offered to most insured’s (may be limited to standard or better on base policy). and included with the policy, but again, “no charge” does not equate to free.
Generally, with the lien method, a lump sum benefit is paid and the amount is based on a formula such as: the lesser of 50% of the death benefit, or $250,000. (Other benefit payouts may be available up to 10 years, see contract for details). The insurance company charges interest on the benefit that was accelerated, and the interest rate is determined at time of claim. The interest is essentially the “charge” to receive the accelerated chronic illness benefit. Generally, the interest accrues daily, and is secured by a lien against the policy’s remaining death benefit. The accruing interest reduces the remaining death benefit, so it is possible for the remaining death benefit to be totally eliminated and the policy to terminate if the insured lives long enough after accelerating the lump sum benefit.
In addition, the lump sum benefit will be subject to the same Internal Revenue Code formula limitations that apply to long-term care benefits, thus any excess amount paid would be subject to ordinary income tax.
Numbers and assumptions from company issuing this type product 18

19. Chronic Illness Rider/ Accelerated Death Benefit
Long-term Care Rider
(IRC 7702 B)
Chronic Illness Rider/
Accelerated Death Benefit
IRC 7702B (or LTC Model Regulations)
IRC 101(g) only
May be marketed verbally and in writing as
long-term care coverage
May NOT be marketed in any manner as LTC
coverage –must be referenced as chronic illness rider
Pays temporary and permanent claims
Generally, most companies require the condition to be certified as permanent to qualify for claim. A few companies allow temporary claims, so please refer to the contract for details.
State specific Long-term Care CE as well as a health license may be required to sell these products– varies by state.
No Long-term Care CE is required as these products are not considered long-term care. Health license may be required.
Has potential for residual death benefit in excess of original specified death benefit amount. (This feature may vary widely among companies)
No residual death benefit is paid in excess of original death benefit amount. Some companies limit acceleration so that a portion of death benefit can be held back and paid upon the death of insured
May pay benefits through indemnity or reimbursement since these are Long-term Care products. LTC benefits generally paid as monthly.
Paid by acceleration, which is “indemnity-like”. Claims reimbursement not possible since not a LTC product. Benefits paid monthly, quarterly, semi- annual or annual payment, or one total lump sum.
LTC rider is underwritten and has an additional cost of insurance charge for rider. LTC benefit pool and monthly benefits are determined upfront and specified at time of policy issue. (Assumes not withdrawals or loans taken which will result in a reduction of benefits)
Some plans underwrite, charge for rider, and determine benefits at issue. Other companies include the rider with the policy and either discount benefits at time of claim, and/or death benefit upon death of the insured.
Let’s take a side by side glance at the differences. These next two charts summarize what we have discussed.
Read slide
NFM-#### FOR BROKER/DEALER USE ONLY—NOT FOR USE WITH THE PUBLIC 19

20. Long-term Care Rider, cont.
Accelerated Death Benefit for Chronic Illness Rider, cont.
Differentiators of LTC Products
Differentiators of 101(g) products
Indemnity
(charge and underwrite)
Reimbursement
Additional charge for rider
No Rider Charge. Rider benefit or DB adjusted
Full benefits paid with no regard to actual LTC expenses. Generally, insurance company does not place any restrictions on how excess benefits can be used. Dollar for Dollar Method used to pay benefits. All benefits known at issue
Only the actual costs of qualifying long-term care services are reimbursed, capped at the maximum monthly LTC benefit amount. Dollar for Dollar Method used to pay benefits. All benefits known at issue.
The rider is fully underwritten. There is an additional cost for the rider, which will increase the premium cost.
The Dollar for Dollar Method is used to pay benefits. All benefits known at issue.
These policies rarely pay in total the issued amount of insurance.
Discount Method – Usually no underwriting for the rider. Factors at claim time such as age, gender, rate class, cash value & discount interest rates are used to discount benefits to be accelerated. Death benefit amount subtracted from acceleration as discount is permanently forfeited. Lien Method- final DB is determined at death subtracting lien on DB.
No monthly receipts or bills to submit.
With Cash Indemnity, the insurance company places no restrictions on benefit use.
Monthly proof of billable expenses required each month to receive benefits.
Some carriers will do direct billing from the provider to the Ins. Co.
Bills and receipts submitted by policy owner – then reimbursed qualifying expenses
The Chronic Illness benefit pool and monthly benefits are determined upfront and are specified at
policy issue.
Discount Method – C.I. benefit pool and benefit amount cannot be determined until time of claim.
Lien Method – C.I. benefit known at policy issue, but final death benefit cannot be determined until death occurs and lien is subtracted from remaining death benefit.
Read slide 20

21. The Importance of Consumer Protections
LTC specific consumer protections
Are required on all LTCi and LTC Riders
Are NOT requires on Chronic Illness riders
Cognitive Impairment – such as Alzheimer’s and dementia, is the leading cause of LTC claims over age 651
Consumer protection features include:
Unintentional lapse protection
Reinstatement provision
Extension of benefits provision
Methods of paying benefits and determining whether a chronic illness rider will pay on a temporary claim are important to ascertain. But there is much more to look at.
What are “consumer protections”?
LTC Riders on life insurance have mandatory built in features that are required of all traditional LTC policies or riders on any type product sold as “long-term care insurance” coverage. Currently, Alzheimer’s disease and dementia are the leading cause of a LTC claim for people over the age of 65.4 Consumer protection provisions provide important solutions that protect policy owners from situations that may unintentionally arise due to a physical or cognitive incapacitation, resulting in an individual’s LTC coverage being put in jeopardy. These provisions help protect the consumer from an unintended policy lapse, and even possible loss of benefits on an already lapsed policy.
These same consumer protections are not required of chronic illness riders, so without careful reading of the specific terms of the chronic illness contract intended for purchase, one can not be sure if some or any consumer protections are included with the policy.
Consumer protection features to watch for
The following is a description of consumer protection features that can make a real difference in protecting the ability for claims payments to be received if ever needed. This is not a complete list of LTC consumer protections, but rather, protections that specifically help protect the policy from unintended lapse or the insured from loss of benefits.
1 American Association of Long Term Care Insurance – AALTCI Sourcebook 21

22. Unintentional Lapse Protection ………
Insurance company require to offer policy owner opportunity to appoint a 3rd party authorized representative
Must be offered at policy issue
Must continue to be offered every 2 years
Policy owner and authorized representative must be informed within 30 days of policy lapse that:
Policy is in danger of lapse
Premium needs to be paid to avoid lapse
Does not guarantee policy won’t lapse – intended to HELP prevent policy lapse
Chronic Illness riders not required to have this feature
All LTC policies and LTC riders are required to have this feature.
• The unintentional lapse feature requires that the insurance company provide the opportunity for the policy owner to set up an authorized representative (third party contact). If the policy is in danger of lapse, notice must be sent to the policy owner and their authorized representative (if one is assigned) within 30 days of lapse to inform them that the policy is in danger of lapse and premium needs to be paid to keep the policy in force. The opportunity to assign an authorized representative must be offered to the policy owner at policy issue and every two years thereafter. This feature does not guarantee the policy will not lapse, but rather is meant to help prevent unintended lapse due to a policy owner’s functional incapacity or a cognitive reason that leaves them unable to pay premium.
Chronic Illness riders are not required to offer this feature. The consequences of not having an unintentional lapse feature on a policy could potentially be further compounded by the following two features that are also not required on a chronic illness rider. 22

23. Reinstatement Provisions ……..
LTC Rider policy reinstatement provisions
Good reason must be shown why premium could not be paid to keep policy inforce – does not need to meet full LTC claim standard
Leaves door open for full policy reinstatement for 5 months
No evidence of insurability can be required
LTC Riders tie the base policy to this same more liberal standard
Chronic Illness Rider reinstatement provisions
Only required to offer same standards as base policy
New evidence of insurability would be required to reinstate policy
If new insurability does not exist – policy remains lapsed
All LTC policies and LTC riders are required to have this feature.
 The reinstatement provision on a LTC policy or LTC rider has more liberal standards than the reinstatement provision of a life insurance policy. Under the reinstatement provision of a LTC policy or LTC rider, reinstatement must be available for a period of time without any evidence of insurability. The reinstatement must be requested within five months of the date of policy termination and reasonable evidence must be shown that the insured either had a functional incapacity or a cognitive reason for being unable to pay the premium due that would have kept the policy in force. As part of the reinstatement procedure, premiums will need to be paid and the policy brought back into good order. Upon reinstatement requirements being met, the policy is considered back in force with all rights and provisions available. Interestingly, when a LTC rider is added to a life insurance policy, the strict requirements of the reinstatement provision of the life insurance policy are softened by the more liberal standard required of the LTC rider – which is a positive benefit to the policy owner.
 Chronic Illness riders, which are governed by life insurance regulations, are not required to offer the same standards for reinstatement required of a LTC policy or LTC rider. Thus you will want to carefully check the terms of the chronic illness rider contract to see if the reinstatement provision of the rider is tied to the more stringent reinstatement provision of the life insurance policy. If so, the provision will allow for the reinstatement of a terminated policy and the attached chronic illness rider, but only with new evidence of insurability.
The potential danger of a reinstatement provision requiring evidence of insurability is that if the policy unintentionally lapses due to the insured having functional incapacity or a cognitive reason, it may also result in the insured being unable to pass underwriting requirements needed to show evidence of insurability. Therefore the policy and chronic illness rider would remain lapsed. 23

24. Extension of Benefits Provision……
LTC Rider extension of benefits provision
Good reason must be shown why premium could not be paid to keep policy inforce – does not need to meet full LTC claim standard
Leaves door open indefinitely to capture LTC benefits the insured would have qualified for while the policy was in force
LTC benefits are paid in arrears and until policy is exhausted or death occurs
Policy is still in lapsed status- no remaining death benefit paid
Chronic Illness Rider not required to have feature
Once the policy is lapsed – it is lapsed
No chronic illness benefits can be recaptured
No death benefit is paid
All LTC policies and LTC riders are required to have this feature.
The extension of benefit provision is a protection that allows for LTC benefits to still be paid if the insured can prove he or she would have qualified for benefits prior to the date their policy was terminated. When a LTC rider is added to a life insurance policy, this provision allows the policy owner to go back and capture LTC benefits the insured would have qualified for on their policy if they had applied for their rider benefits while the policy was still in force. The policy is still considered lapsed for purposes of the death benefit; therefore the only benefits that will be paid are the LTC benefits the insured would have qualified for prior to the termination of the policy.
Chronic Illness riders are not required to offer this feature. Thus, if the insured would have qualified for chronic illness rider benefits prior to policy lapse, would be no contractual right to recapture benefits. 24

25. ………In Summary Make sure your client understands:
What triggering conditions are covered under the policy
If temporary claims included?
How are rider benefits calculated
How are rider benefits paid to the policy owner
If there are policy protections to help avoid unintentional lapse
If reinstatement provisions of the rider require evidence of insurability
If there are provisions contained in the rider to pay deserved benefits even if a policy unintentionally lapses (extension of benefits)
Understanding these provisions will help provide a better experience if a claim is ever arises
Summary
In the end, the client’s best interest should always be of first consideration when helping a client choose a solution for potential long-term care or chronic illness needs. When showing a LTC or chronic illness rider to a client purchasing life insurance, the following check list should be covered and discussed. 
What triggering conditions are covered under the policy?
Are temporary claims included?
How are rider benefits calculated?
How are rider benefits paid to the policy owner?
Are there policy protections to help avoid unintentional lapse of the policy?
Do the reinstatement provisions of the rider require evidence of insurability?
Are there provisions contained in the rider to pay deserved benefits even if a policy unintentionally lapses (extension of benefits)?
 Making sure your client understands the LTC or chronic illness coverage they are purchasing will potentially lead to a better experience for all if and when a claim eventually arises. 25

26. FOR BROKER/DEALER USE ONLY — NOT FOR USE WITH THE PUBLIC
Here when you need us National Sales Desk: Nationwide Financial Network®: Brokerage General Agents (BGAs): Option 9, extension:
Questions?
NFM-9907AO.4 (06/16)
FOR BROKER/DEALER USE ONLY — NOT FOR USE WITH THE PUBLIC 26