1. FOR FINANCIAL PROFESSIONAL USE ONLY-NOT FOR PUBLIC DISTRIBUTION
My client is concerned about long-term care expenses. Now what?
Date:
Presenter
Title
Policies issued by American General Life Insurance Company, member of American International Group, Inc. (AIG)
FOR FINANCIAL PROFESSIONAL USE ONLY-NOT FOR PUBLIC DISTRIBUTION

2. Agenda Key LTC Statistics What is Chronic Illness?
What Options are Available?
Understanding
Stand Alone LTC Policies
Linked-Benefit LTC Policies
Life Insurance with Chronic Illness or LTC Riders
The Types of Chronic Illness Rider Designs
Case Studies
Key Questions to Ask

4. Will it happen to you?
* Centers for Medicare & Medicaid Services 2/21/2017 (longtermcare.acl.gov/the-basics/index.html)
** , updated on 4/7/2014

5. Where will care come from?
* Today's Research on Aging, Population Reference Bureau, February 2016.

6. Will you be able to afford Long-Term Care?
Centers for Medicare & Medicaid Services, “Medicare coverage of Skilled Nursing Facility Care” medicare.gov/Pubs/pdf/10153.pdf, January, 2015
All other stats are were accessed on 4/6/2017

7. What does that mean for your financial assets?
* HealthView Services: 2016 Retirement Health Care Costs Data Report

9. What is a Chronic Illness?
BODY
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.
Chronic illness care, which is also called long-term care, is needed for 2 reasons:
MIND
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.

10. What options are available?
Stand-alone LTC
Linked-Benefit Long Term Care
Life Insurance with Chronic Illness/ LTC Rider
Long Term Care Coverage that Provides no Death Benefit
Long Term Care Coverage with an available DB
Life Insurance with Accelerated Death Benefit for Chronic Illness or LTC
High LTC Need
High Life Insurance Need

11. Understanding Stand-Alone LTC Policies
Typical Features
Client Profile
Generally, provides the most LTC Benefit per premium dollar
Most are a Reimbursement Plan, rather than an Indemnity Plan
Some now offer ROP
If you don’t use it, you lose it.
Inflation options are available, at an additional cost
Some benefits received by insured may not be covered by reimbursement
Premiums are not guaranteed
Age 50 or older, married, and generally healthy
Homeowner
Probably already owns life insurance
Does not have a need for additional life insurance protection
Desires Inflation protection
Needs pure LTC protection
Likely knows someone who needed long-term care

12. Understanding Linked-Benefit Long Term Care Policies
Typical Features
Client Profile
ROP Features available on some products
Inflation options are available, at an additional cost
Some benefits received by insured may not be covered by reimbursement
Guaranteed premiums are available
Death benefit available
Age 50 or older, married, and generally healthy
Homeowner
Probably already owns life insurance
Seeking guarantees
Desires Inflation protection
Likes the concept of having the death benefit paid if LTC is not needed
Likely knows someone who needed long-term care

13. Life Insurance Rider Features
Understanding LTC & Chronic Illness Riders
Life Insurance Rider Features
Client Profile
ROP Features available on some products
Guaranteed premiums are available
Death benefit available
Accelerate all or a portion of the death benefit
Waiver of monthly deduction offered on some riders
Some designs can increase the death benefit/rider benefit over time
Is age 50 or older, married, and generally healthy
Homeowner
Previously owned standalone LTC and experienced significantly increasing premiums
Wants control of how assets are spent for future care and does not want to track receipts
Is currently providing financial support to parents, or knows someone who that is
Knows someone who has been in a nursing home or need attentive medical care
Has an existing life insurance policy without a living benefit rider

14. Reimbursement vs. Indemnity Products
Reimbursement products
Indemnity products
Provides a benefit if the client meets the requirements of the policy and spends money on a qualified service.
PROS: Clients receive a benefit equal to their total cost, up to a predetermined maximum
CONS: Rider usually requires confinement in a facility and does not cover home care or family care.
Restrictions exist for reimbursement by ILIT-owned contracts
Provides a benefit once client meets the requirements of the policy.
PROS: Product does not require clients to receive services in a care facility
PROS: Clients 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.

15. Understanding LTC and Chronic Illness Riders
LONG-TERM CARE RIDERS
Tax Code
101G
7702B
Duration
Benefit duration based on death benefit, cash value, and benefit amount payment options
Defined benefit and duration
Permanency Requirement
Historically required permanent condition
Condition can be temporary or permanent
Claim Type
Indemnity
Indemnity or Reimbursement
Benefit payments
Tax favored if meet per diem requirements (Current $360 per day)
Tax favored if meet per diem requirements (Current $360 per day)
Other features
Some waive policy monthly deductions while on claim
Can have inflation adjustment
Licensing
Life licensed except in CA that requires LTC Certification on all decks
Requires A&H License & LTC certification

16. Understanding Different Chronic Care Rider Designs
Discounted Death Benefit Basics – No Up-front Cost
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 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 at time of policy purchase
Significantly shorter life expectancy = larger payout
Moderately impacted life expectancy = smaller payout
Depending on carrier, clients may accelerate up to 100% of the policy death benefit up to a lifetime maximum

17. Understanding different chronic illness rider designs
Dollar for dollar benefit payout - up-front cost

18. Chronic Illness Benefits of Accelerated Access Solution:
Indemnity business
FLEXIBLE BENEFIT BASE
No LTC license necessary (Except California)
Two out of six ADLs; or severe cognitive impairment
Non permanent
No receipts
Spend benefits on anything
Death benefit can be up to double the Chronic Illness 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.
Regardless of which of the two triggers applies, the benefit will only be available if the impairment is deemed to be permanent.
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.
Then you have two decisions to make: your aggregate benefit and your monthly benefit.
Aggregate Benefit:
Your aggregate benefit must be at least $50,000, and cannot be less than half of your total Death Benefit. So, for a $100,000 death benefit, your Accelerated Access benefit must be at least $50,000. For a $500,000 policy, the Accelerated Access benefit must be at least $250,000.
Your aggregate benefit can also be no greater than your death benefit, and is subject to a maximum Accelerated Access benefit of $1,500,000. So, if your death benefit is $900,000, your maximum Accelerated Access Solution benefit is $900,000. If your death benefit is $1,800,000, your maximum aggregate Accelerated Access Solution benefit is limited to $1,500,000.

19. FLEXIBLE MONTHLY BENEFIT Maximum Monthly Benefit
Benefits of Accelerated Access Solution:
Chronic Illness
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!
Maximum Monthly Benefit
equals
Total Benefit ÷ 12
IRS caps the maximum daily rate each year. The 2017 maximum is $360/day or $10,950/month. Subsequent years may be higher.
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!

20. Case Study Male Client age 50
Good health (Preferred Non-Tobacco Rating)
Makes $70k per year as a teacher
Has a 403b portfolio with a current value of $250,000
Has a net worth of over $350,000 (Excluding Primary Residence)
At retirement will receive Pension
Concerned with costs associated with LTC
Has legacy aspirations
Not an actual case, and is a hypothetical representation for illustrative purposes only.

21. Case Study (continued)
Life Insurance Policy Assumptions: Value + Protector
Underwriting Class: Preferred Non Tobacco
Initial Death Benefit is $400,000
Annual Premium of $5,000 for 30 years (Till age 80 - $150k total outlay)
IRS Per Diem AAS rider included (2017 is $360 per day) with no permanency required (Other options may include 2% or 4%)
Assumed a 6.00% projected rate of return (Utilizing ML Strategic Balanced Index)
Cash surrender value at age 80 is $191,835
Cash surrender value at age 100 is $449,779 (Death benefit is $449,779)
As the Death benefit increases, so does the AAS rider
Not an actual case, and is a hypothetical representation for illustrative purposes only.

22. Who do you know? Client between the ages of 45-60
Has discretionary Income of $5,000 or more per year
Has a minimum net worth of $250,000 (Outside of primary residence)
Projected Retirement Income will “just be enough to get by if they stay healthy
Is providing LTC support to parents or knows someone that is
Concerned about maintaining financial resources for surviving spouse in the event of significant LTC expenses
Not an actual case, and is a hypothetical representation for illustrative purposes only.

23. Case Study Female age 65 Good health (Standard Non-Tobacco)
Retired School teacher
Has pension
Has Current 403b/IRA Valued at $300,000
At age 70 ½ she will be required to take RMD’s
Client does not anticipate needing the RMD at age 70 ½
Client has expressed concerns with costs associated with LTC
Has legacy aspirations
Not an actual case, and is a hypothetical representation for illustrative purposes only.

24. Case Study (continued)
Life Insurance Policy Assumptions Secure Lifetime GUL 3
Guaranteed Death Benefit of $250,000
Underwriting Class: Standard Non Tobacco
Pay premiums to age 90 with a guarantee through age 105
Annual Premium: $7,500 for 25 years (till age 90 - $187,500 max outlay)
IRS Per Diem AAS rider included (2017 is $360 per day) with no permanency required (Other options may include 2% or 4%)
Other riders may include: Lifestyle Income Solutions rider
2 Enhanced Surrender Value (ROP) Options: Age 85 $75,000 and Age 90 $100,000 (Lesser of 40% of DB or 100% of premium)
Not an actual case, and is a hypothetical representation for illustrative purposes only.

25. Who do you know? Client is between ages 60-70
Has minimum IRA of $ 300,000
Does not anticipate needing RMD’s at age 70 ½.
Has expressed concerns about maintaining dependence from LTC
Has legacy aspirations
Not an actual case, and is a hypothetical representation for illustrative purposes only.

26. Key questions to ask
Is this an LTC (7702B) design or Chronic Illness (101G) design?
Is it a reimbursement or indemnity design?
Does the client understand the difference and is this important to them?
Is there a cap on the maximum monthly payout?
Is there a death benefit?
What happens to the policy charges when you go on claim?
Does the client have to pay up front for the product or is the payment taken if they go on claim?
Is the condition required to be permanent?

27. More information available
White Paper: Taking an In-Depth Look Long-Term Care Benefits vs. Chronic Illness
On demand Training: LTC vs CI Overview
Accelerated Access Solution Resources:
Overview (PPT)
Top reasons to sell
FAQ
Consumer brochure
Sales Ideas (multiple flyers)
Eye Opening Health care Statistics
Long-Term Care Statistics
aig.com/Optionality
Please access the Chronic Illness Rider page at aig.com/Optionality for a multitude of resources regarding LTC vs CI as well as information on our Chronic Illness ABR – Accelerated Access Solution. This page includes a white paper, on demand training, several infographics as well as materials for the Accelerated Access Solution.

29. Policies issued by American General Life Insurance Company (AGL), Policy Form Numbers 15442, ICC ; Rider Form Numbers, 13600, ICC , 82012, 82410, 88390, , ICC , 15972, 13601, ICC and Issuing company AGL is responsible for financial obligations of insurance products and is a member of American International Group, Inc. (AIG). Guarantees are backed by the claims-paying ability of the issuing insurance company. 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.
The company, its distributors and representatives are not authorized to give legal, tax or accounting advice. Applicable laws and regulations are complex and subject to change. Any tax statements in this material are not intended to suggest the avoidance of U.S. federal, state or local tax penalties. Clients should consult their attorney, tax advisor or accountant regarding their particular situation.
AGLC ©2017 AIG. All rights reserved.
FOR FINANCIAL PROFESSIONAL USE ONLY – NOT FOR PUBLIC DISTRIBUTION
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.