Report from the 4th Webinar on Equity-Index Annuities With and Without Underwriting
Webinar #4 offered challenging ideas and I love that. We have so many different ways to pay for long-term care today but equity-index annuities (also called fixed index annuities, or FIAs) haven't hit main stream yet. I found them because I was searching for a way to help people who are totally uninsurable for any kind of traditional or combo LTC product. One of our former trainers, John Ferroni, introduced me to Evan Ward at Impact Partnership in Kennesaw, GA and Evan introduced me to F&G and Security Benefit. These are the only two that I have used as the other equity index annuities only pay if the policyholder is in a nursing home and that didn't interest me one bit.
What is an equity index annuity?
It's a type of deferred annuity that's been around since about 1997 that protects policyholders from downturns in the market yet allows them to profit from upturns. It does this while providing a guaranteed growth rate for the money that will eventually be used to provide a lifetime income. This money is called the income base. This is also the base that determines the long-term care benefit, which is usually double the lifetime income.
Variable annuities are commonly sold to provide a guaranteed lifetime income by financial professionals with a securities license. The huge difference between variable annuities and FIAs is that money in a variable annuity is in the stock market with corresponding fees to manage that money. Money in an FIA is not in the stock market and fees are much lower. An FIA looks at the stock market via various indexes, some connected to the S&P 500 and many others that aren't, and credits growth to the FIA accordingly. You can sell them with a health insurance license so you don't need a securities license. (On the flip side, I've learned that financial professionals with a securities license only are pushing variable annuities because they aren't licensed to sell FIAs.)
The important takeaway here is that in a variable annuity, your real money can drop like a rock when the market has a downturn! To repeat, money in an FIA is NOT in the stock market and can never decrease due to stock market losses.
Early FIAs capped the growth, commonly at 3-5% annually. You can see p. 5 of a report from the Wharton Financial Institutions Center that even these older ones did not experience a loss in the years 1997-2010. Newer ones allow uncapped growth above a certain percentage; e.g. 1.25% annually and this growth could be measured annually or locked in over a 5 year period. This index growth is in addition to the guaranteed growth on the income rider. The fee on the products I have used is zero on the base annuity and .95 on the lifetime income rider.
The best thing I like is that the account value; i.e. the real money, can never decrease due to stock market downturns, to the point where my husband and I put some of our retirement money into an FIA, not because we need the LTC benefit, but because we wanted to protect our savings from another huge downturn like we saw in 2008.
To set the stage in a much more comprehensive way, Evan Ward, Senior Vice President of Sales with Impact Partnership was our first guest speaker and did a fabulous job laying the groundwork of how an equity index annuity can greatly contribute to making sure people don't outlive their money. Evan introduced us to a wonderful tool called The Efficient Frontier powered by Ibbotson Morningstar which calculates the impact of adding an FIA to a retirement portfolio.
Then Jason Jones, Regional Sales Manager, OneAmerica laid out the direction of OneAmerica's new equity-index annuity with light underwriting. This product is the only FIA that is HIPAA-compliant and provides LTC benefits 100% tax-free as long as it was funded with non-qualified money. Any of the products I'm mentioning can be funded with qualified money, but gains in the distributions for LTC from a regular FIA will be taxed as ordinary income, so being able to get the money out tax-free is a distinct advantage for OneAmerica.
Jason introduced us to a simple calculator on the OneAmerica site to see how the "Indexed Annuity Care" works in each state.
Then I went through a detailed case study on my client "Martha" who bought an FIA at age 65 with a $225,000 premium and is expected to have $210,000 a year for up to 5 years for LTC at age 85, based on a lifetime income of $105,000. I also showed amounts at ages 80, 75 and 70. She has longevity in her family and expects to live into her 90s. If she never needs care, her son will receive the death benefit. (Right now I'm working on a case that will use an FIA to make it possible for a client to buy a lower traditional benefit because some of the future benefit will come from the FIA. I'll share the results of that analysis in a future article.)
I ended the webinar by directing you to my online store to especially point you to my ABC books. There's a section that covers using combination life or annuity products which works really well for the introduction of any type of combo product to your clients. Financial professionals have ordered thousands of these because they provide a foundation of knowledge that definitely shortens the sales cycle. I know that from using them personally (more on that in the session on internet selling on Aug. 5th) and from what agents have told me. They are now available in print, with an audio CD with your voice branding it, and in an ebook branded with your contact info.
Next week we will talk about linked benefit products and my favorite way not to sell them! I think you will be intrigued and challenged with new ideas. I'll be showing a product I was able to find that an HIV positive individual can use to pay for LTC. We will cover a number of products such as Lincoln, Nationwide, OneAmerica and Pacific Life to give you a flavor of how they work.
Remember, if you are just joining us, you can buy the webinars you have missed as they are all being recorded!! The handouts for each webinar are also posted on the page with the recordings which is here. Or if you bought some but not all, you can add to your order by emailing Lawrence@ltcconsultants.com and he will adjust your payments if necessary with the volume discount.
|$49 each for 1-3
|$39 each for 4-6
|$29 each for 7-9
To help you decide, the complete list is below with session descriptions this time. You will see they are every Wednesday from 1:45 - 3:00 CST, through August 26th. IMPORTANT: Please note that the first 15 minutes is great music just like I've always offered in my live seminars. The actual presentation starts at 2:00 p.m. CST with interactive Q&A at the end. I'll call on you and let you ask your question yourself whenever possible.
||How to convert term life insurance into guaranteed issue LTC insurance
|Historically, the objection to traditional long-term care insurance has been the "use it or lose it" issue as typical return-of-premium riders have been expensive. People are concerned they will die before ever needing long-term care; or will use only part of their benefits. There's also the problem of people becoming uninsurable by the time they consider LTCI, often in their 60s or older. Living Care Extension is a program enabling your client to use their existing term life insurance policy in order to create a highly effective alternative to long term care insurance, and by doing so, address both issues.
||How to sell long-term care insurance that is affordable in today's market/Finding money with High Deductible Plan F with a reserve annuity
and Gary Owen
(Premier LTC Brokerage)
|How can LTC insurance possibly be affordable now that most companies are gender rating and now that nursing homes cost $220-$250 per day? ($350-$400 higher cost areas) In addition to my own ideas, our guest speakers will expose you to ways to help more people by finding money for LTCi AND make the benefits more affordable.
||How to sell LTC insurance to companies of all sizes
|How many times have you heard we need to sell LTCi to younger people? Why do robbers rob banks? Because that's where the money is! Healthy younger prospects are at WORK. There are only three companies that offer limited underwriting for worksite sales. Hear what they are looking for and I'll share my top ideas for double digit participation.
||Equity index annuities to fund LTC, with and without underwriting
|This session will offer double the content for your money. Our guest speakers will comment on why baby boomers are moving millions of dollars to equity index annuities to prevent their savings from another stock market drastic drop and how they can help solve the LTC planning need as well. I went in this direction to help people who couldn't qualify for traditional or combo LTCi and have learned a TON about the entire picture of EIAs.
||My favorite linked benefit products and how not to sell them
|My dream for this session is to get away from the popular way of selling combo plans of "Give me $100K and I'll give you $300K for LTC" with no thought about what the policy will pay out per month when care is needed.
||How to successfully do internet selling, including technology tips
|Most of you are probably selling online. I've asked my friend Scott Olson to join me as he made his first internet sell in 1999. Lawrence Vivenzio is the wind beneath my wings in my own internet selling and it won't take you long to find out why!
||Selling home care services to people who can't qualify for LTC insurance/The latest with using reverse mortgages to fund LTC and LTC insurance and how to work with the non-cross selling law
|Yes, you can still help people who are totally uninsurable but don't have the savings to do an annuity without medical underwriting. You can help them stay home as long as possible with home are packages and/or a reverse mortgage. Our guest speakers will open your eyes to the latest updates on both these topics. After listening to them, I learned I didn't "know it all"!
||My formula for analyzing a rate increase and retaining the client, plus the regulatory process of filing a rate increase and the latest on what the NAIC is doing about rate increases
|I am so proud to have my dear friend Cheryl Bush, SVP of Operations at MedAmerica and one of the smartest people I know, tell us what's really going on with rate increase regulatory activity. I'll be sharing my formula for helping clients analyze a rate increase. Chris Sitek will chime in about how he uses my formula that way and in annual reviews to retain clients.
||The latest research published in 2014 on benefits actually being paid utilizing claims studies/Projections on claim duration (get ready for a few surprises)
(Long-Term Care Group)
|We should call this session "Where the Rubber Hits the Road" because that's what paying claims is all about. LifePlans and Long-Term Care Group will share the latest research about the value of LTC insurance and a peek into the future with new projections on claim duration.