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Life Insurance with Critical Illness or Chronic Illness Riders

This section of the course looks at the differences with this type of coverage vs. Hybrid/Life or Linked/Life policies. This section of the course doesn’t pertain to traditional Partnership or non-Partnership long-term care insurance as there are no life insurance benefits associated with that type of solution.

Benefit eligibility is much different with this type of policy because with this policy the “supplemental benefit” is a Critical or Chronic Illness rider.

Chronic/Critical Illness with LTC Riders Benefit Eligibility

Severe Burns

Traumatic Brain Injury

Heart Attack

Stroke

Cancer

Major Organ Transplant

Kidney Failure

Blindness

Angioplasty

Open Heart Surgery

ALS

Paralysis

Alzheimer’s

Coronary Artery Disease

Heart/Lung Bypass

Mechanical Respiration

Arterial Aneurysems

Central Nervous System Disease

Coronary Bypass Surgery

Permanent Impairment

Nursing Home Confinement

SB 281 Section 10271

Life Insurance policies that offer Chronic Illness or Critical Illness Riders differ greatly from Traditional LTC, Hybrid/Life and Linked Benefit/Life policies:

Benefit Eligibility

Benefit Amounts

No Residual Death Benefit

Depending on distribution of benefits premiums may not be waived

Waiver of Premium

All life insurance policies have a “waiver of premium” in one form or another in order to avoid lapses in coverage.

With this type of insurance the waiver of premium when the insured becomes totally disabled as defined in the supplemental benefit (critical or chronic illness rider)

The waiver may continue until the insured is no longer disabled or for the period specified by the supplemental benefit.

SB 281 Section 10271.1 (a) (1)

How is “Total Disability” Defined?

Total disability may not be less favorable than the following:

During the first 24 months of disability the insured can not with reasonable continuity the substantial and material duties of their job due to sickness or bodily injury

After the first 24 months of total disability the insured due to sickness or bodily injury is unable to engage with reasonable continuity in any other job they could reasonably perform in light of their age, education, training, experience, station in life or physical and mental capacity

Total disability may also include permanent of loss of both eyes, loss of hearing in both ears, speech, the use of both hands, both feet or one hand and one foot

The insurer may require the total disability to continue for a period of time as specified by the supplemental benefit or may allow separate periods of disability to be combined

SB 281 Section 10271..1 (2) (A) (B) (3) (4) (5)

How is “Waiver of Premium” Defined?

Waiver of Premium may not be less favorable than the following:

If the total disability occurs prior to the insured’s 60th birthday all premiums must be waived until the insured’s 65th birthday, if the total disability continues all premiums must be waived

With regard to the exclusions in the contract the insurer may exclude a total disability occurring after the policy anniversary as applicable under age 65

The exclusions in the contract are also the recognized exclusions in a Hybrid/Life or Linked/Life Benefit

AB 281 Section 10271..1 (2) (5) (a) (b) (6)

How is “Special Surrender Benefit” Defined?

Special Surrender Benefit is defined as a “waiver of surrender charge benefit” where the insurer waives the surrender charges usually charged for a withdrawal of funds from the cash value or account value of an annuity contract if the following criteria is met:

Insure develops any medical condition where the owner’s, insured’s or annuitant’s life expectancy is expected to be less than or equal to a limited period of time not to be restricted to less than 12 months or more than 24 months

Is receiving care as prescribed by a physician, RN or licensed social worker:

Home Care

Community Based Services

Skilled Nursing Facility

Convalescent Nursing Home

Residential Care Facility for the Elderly

Out of state: services providers defined as comparable licensing and staffing requirements to CA providers

SB 281 Section 10271..1 (2) (6) (b) (1) (2) (3)

Special Surrender Benefit is defined as a “waiver of surrender charge benefit” where the insurer waives the surrender charges usually charged for a withdrawal of funds from the cash value or account value of an annuity contract if the following criteria is met:

Has a medical condition that would in the absence of treatment result in death as defined by the supplemental benefit, but that shall not be restricted to a period of less than six months

Is totally disabled as follows:

During the first 24 months of disability the insured can not with reasonable continuity the substantial and material duties of their job due to sickness or bodily injury

After the first 24 months of total disability the insured due to sickness or bodily injury is unable to engage with reasonable continuity in any other job they could reasonably perform in light of their age, education, training, experience, station in life or physical and mental capacity

Total disability may also include permanent of loss of both eyes, loss of hearing in both ears, speech, the use of both hands, both feet or one hand and one foot

The insurer may require the total disability to continue for a period of time as specified by the supplemental benefit or may allow separate periods of disability to be combined

SB 281 Section 10271.1 (4) (A) (B) (C) (D)

Special Surrender Benefit is defined as a “waiver of surrender charge benefit” where the insurer waives the surrender charges usually charged for a withdrawal of funds from the cash value or account value of an annuity contract if the following criteria is met:

Has a chronic illness or either of the following:

unable to perform without substantial assistance from another individual at least two out of six activities of daily living (ADLs) for at least 90 days, due to loss of functional capacity; or

requiring substantial supervision to be protected from threats to health and safety due to severe cognitive impairment.

Has become voluntarily or involuntarily unemployed

SB 281 Section 10271.1 (5) (A) (i) (ii) (B) (i) (ii) (6) (c)

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