1. LTC vs. CI ABRs Navigating through the Alphabet Soup Name Title
PRESENTED BY:
Name
Title
Today we are going to address discuss long-term care and chronic illness accelerated benefit riders so that you can better understand the differences and help your clients navigate through this alphabet soup to make the best decision for them.
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Policies issued by American General Life Insurance Company, member of AIG
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2. Centers for Medicare & Medicaid Services 11/14/2014
Why Bother Understanding LTC and CI Differences
It Won’t Happen to Me Or Will It?
Centers for Medicare & Medicaid Services 11/14/2014
No one wants to think about being disabled during retirement.
It will happen to “other people” the reality is much different
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.

3. And if it Does, Can You Afford it?
Fidelity.com/inside­fidelity/individual­investing/fidElity­estimates­couples­retiring­in­2013­will­need­ ­to­pay­medical­expenses­throughout­retirement, 2013
If you should have some medical expenses during retirement, how much could that be? It’s a good question and one many are not prepared for.
The average couple retiring at 65 can expect to pay $220,000 in out-of-pocket medical expenses during retirement

4. Where Will You Get Long-Term Care if Needed?
Congressional Budget Office “Rising Demand for Long-Term Services and Supports for Elderly People” June 2013
Seven in ten (70%) of people with Alzheimer’s disease and other dementias live at home.
If you need them, what type of long-term care services would you prefer? Most live in private homes and rely on family and friends to assist.
Look at the Alzheimer’s stat - Seven in ten (70%) of people with Alzheimer’s disease and other dementias live at home.
11/14/2014

5. What is a Chronic Illness
What is a Chronic Illness? Chronic illness care, which is also called long-term care, is needed for 2 reasons:
B O D Y
M I N D
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.

6. Short-Term Conditions
Examples include:
Fractures
Joint replacement
Broken leg
Heart attack
Heart failure
Minor stroke
Diabetes
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.
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. Long-Term Conditions Examples include: Alzheimer’s disease
Serious stroke
Frailty at older age
Crippling arthritis
Cancer
Parkinson’s disease
Brain and spinal cord injury
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.
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.

8. Chronic Illness vs. Long-term Care Riders
Benefit Comparisons
CHRONIC ILLNESS RIDERS
LONG-TERM CARE RIDERS
Diagnosis
Severe cognitive impairment or unable to perform 2+ ADLs
Duration
Usually permanent
At least 90 days
Payment types
Indemnity
Reimbursement or Indemnity
Requirements
Reimbursement requires facility confinement
Benefit types
Face amount acceleration
Face amount acceleration & Extension
Benefit payments
Tax favored if meet per diem requirements (Current $330 per day)
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

9. Chronic Care vs. Long-term Care
For both chronic care and long-term care, a licensed health care practitioner determines qualification (not the insurance carrier)
CHRONIC CARE
LONG-TERM CARE
Use Section 101(g) only
Use Section 101(g) & 7702(b)
Pays only after permanent diagnosis for most riders.
There are recently released versions of this design with the permanency requirement removed.
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

10. Reimbursement vs. Indemnity Products
Reimbursement 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.
Also issues with ILIT-owned contracts
Indemnity products
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: 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.

11. 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
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
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

12. Understanding Different Chronic Care Rider Designs
Lien Method – No Up-front Cost
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.  This way, the policyholder is charged requisite with actual utilization of the benefit (the first option everyone pays whether they use it or not and in the second option, the adjustment of the benefit payment is based on life expectancies not actual utilization) which provides for the most equitable accounting of the cost of the benefit.  As with the first option, a minority of riders fall into this category.

13. Accelerated Access Solution®
Understanding Different Chronic Care Rider Designs Dollar for Dollar Benefit Payout - Up-Front Cost
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.

14. Benefits of Accelerated Access Solution: Chronic Illness
101(g)
No LTC license necessary
Two out of six ADLs; or severe cognitive impairment
Does not have to be a permanent condition
Indemnity Benefit
No receipts
Spend benefits on anything
Flexible Benefit Base
Benefit = 50% up to 100% of death benefit
$50,000 minimum up to $1,500,000 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 a Secure Lifetime GUL 3, Max Accumulator+, Value+ Protector, or AG Platinum Choice VUL 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.
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.

15. 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 = Total Benefit
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 2016 maximum is $340/day or $10,341.66/month. Subsequent years may be higher.

16. More Information Available
White Paper: Taking an In-Depth Look Long-Term Care Benefits vs. Chronic Illness Benefits
On demand Training: LTC vs CI Overview
Accelerated Access Solution Resources:
Overview (PPT)
Top reasons to sell
FAQ
Eye Opening Health care Statistics
Long-Term Care Statistics
aig.com/QoL
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.

17. Important Information
The purpose of this presentation is to present a comparison - LTC vs. CI ABRs. It cannot be used with prospective clients. Information is from public sources and deemed reliable at the time of its creation. Although every attempt has been made to verify the accuracy of the information displayed, it cannot be guaranteed.
Policies issued by: American General Life Insurance Company (AGL), Policy Form Numbers 15442, ICC , REV0815, 13717, ICC , ICC , 14779, 14904, ICC , 16760, ICC , 15646, ICC ; Rider Form Numbers 13972, 13600, ICC ;13601, 82001, CA WMDR Rev0914, 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.
AGLC MiN REV0416
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Here are some important notes about products and riders we’ve discussed. .
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.