Skip to content

Case Study 3

Life Insurance Can Offer More Than a  Legacy.

How a Living Benefits Rider can ease the burden of long-term care expenses.


Successfully addressing long-term care needs.

Traditionally, life insurance is purchased by individuals seeking financial protection and benefits for loved ones upon their death. Yet with the right planning, life insurance can do much more. Here’s an example of how Diversified recently helped a broker meet their client’s specific needs by expanding the scope of financial protection offered through a life insurance policy.

The client, we’ll call him John, was a 55 year old male, in preferred health, who had a $500,000 whole life contract with a $200,000 cash surrender value. John had no long term care insurance, an area of concern, and he was paying $7,500 in total annual premiums for his current policy.1

Upon a careful review of John’s in-force insurance, Diversified recommended that the broker present a universal life contract with a Living Benefits Rider. This solution would improve John’s living long-term protection while still offering a substantial death benefit for his beneficiaries.2 Living benefits riders allow the policy owner to access funds, as an acceleration of the death benefit, to address qualified long-term care (LTC) expenses up to a specified policy maximum.

In addition, we recommended that the funding for the new policy be secured from the cash value of John’s current whole life contract via a 1035 exchange. Working with his broker, John was able to purchase a universal life insurance policy with a death benefit of $1,054,236 and a monthly long-term care benefit maximum of $21,085 (2% of death benefit). Under current assumptions, the policy provided lifetime coverage with no further premiums and was guaranteed for 23 years.

Getting results for your clients.

Typically, living benefits riders can be added to a life insurance contract for a fraction of the cost of a standalone long term care policy. As a result, you can offer your clients more protection through one cost-effective product. The table below provides a comparative example of policy costs and demonstrates the cost-effectiveness of a living benefits rider vs. a standalone LTC policy with similar benefits.

Example: Policy Cost Comparison –– Annual Premiums

Age (Male) 45 55 65 75
$1MM life policy $6,677 $10,935 $19,086 $35,710
$1MM life policy with Living Benefits Rider * $7,177 $11,715 $20,374 $38,102
Additional cost difference for policy with LBR $500 $780 $1,288 $2,392
Cost of standalone LTC policy ** $2,000 $2,300 $4,500 $13,900


* Living Benefits Rider provides a $10,000 maximum monthly benefit until the total policy death benefit is exhausted, with a 100 day service elimination period and no inflation adjustment (based on preferred health).

** Long Term Care policy provides a $10,000 maximum monthly benefit for 5 years, with a 90 day service elimination
period and no inflation adjustment (based on preferred health).

How can Diversified help you build long term financial security for your clients? Give us a call today.

1 The policy owner (client) was using dividends to offset premium payments on his whole life policy.

2 The total death benefit is reduced by the total amount of accelerated living benefits used for long term care and
other qualified expenses.

Copyright © 2016 Diversified Individual Brokerage LLC. All rights reserved.
For Financial Professional Use Only. Not For Use with, or Distribution to, the General Public