“A rose by any other name would smell as sweet.”
—William Shakespeare, Romeo and Juliet.
We’ve just spent 30 years helping consumers understand that being totally unprepared for long term care risk is a sure-fire strategy for financial catastrophe. We have spent the same period determining the true nature of the risk and where best to apply insurance protection. We have acquired a better understanding of how much insurance is enough. We have developed multiple product choices and are much better able to customize insurance solutions. But recently I have witnessed a prevalent speech impediment bordering on an institutional stutter in terms of what we call the insurance options we sell. Is it long term care, long term services and supports, chronic illness benefits or extended care?
I was recently admonished by the strident voices from “compliance” for at least the ten thousandth time that you cannot call a chronic illness ADBR long term care insurance.
It says so right on the front of the policy! As the standard and overly familiar lecture began, my mind was screaming, “This confusion must stop!” So I politely asked, “Do you know why?” Herein lies the problem: We know why, they do not. Make sure your client understands a rose is a rose is a rose.
If that rider is built with the correct language currently available from the IIPRC it is insurance for long term care risk abatement. The structural differences are very small and do not defeat the purpose and intent of the product. The monies may be coming from a present value of the death benefit, but the claim will be paid exactly the same. So please do not forget that you simply cannot call it by its most descriptive term even though that is exactly what it is. Why? A little LTCI history 101 is in order. HIPAA defined TQ LTCI as health insurance under IRC Section 7702B. This is also exactly why stand-alone LTCI corporate premium deductibility will continue to elevate this sales advantage to the head of the sales prospect line. A chronic illness ADBR on the other hand is simply a HIPAA expansion of terminal illness provisions under IRC Section 101g. So again, to jog your memory, HIPAA gave us two paths to tax-free benefit payments: TQ LTCI and more early present value death benefits. Combo policies did not come to life however until the long term care provisions of the PPA went into effect January 2010, where the cost of the rider could be deducted internally without creating a taxable event. And in April 2016, alternate adopter language was added to the IIPRC which allows the identical claim triggers as LTCI.
After you exclude the “discount” method of claim payment, which I have been trying to accomplish in this column for many months, you are left with a handful of honest and transparent “pay as you go” riders. It makes no difference if they are 7702B or 101g riders, you have paid for a known benefit you will receive when you need care. It should be plain to all that you cannot call life insurance health insurance! But if the claim triggers are the same, and the claim is administered and paid on the same terms (reimbursement or indemnity), then dear friends they are truly both roses and both smell sweet to me. And just in case you don’t relate to flowers or Shakespeare; “Sticks and stones can break my bones but words can never hurt me!”
Other than that I have no opinion on the subject.
