Desjardins Insurances has introduced the first life insurance/long-term care product on the Canadian market. Available on its universal life platformPace, the product is T100 permanent life plus an option that offers insured age 65 and over with loss of independence a monthly benefit equal to 1% of the life insurance amount.
There is a 90-day waiting period before benefits pay. Insured can receive the benefit for a maximum of 100 months, to a monthly limit of $2,500. They do not have to pay premiums once benefit payment begins. If the insured's health improves, they can start paying the premiums again in the Independence Option, which corresponds to the balance of their life insurance amount. Regardless of the duration of benefits, policy holders can receive at least 25 % of the life insurance amount set when the policy was written. Premiums are guaranteed.
The product is an additional tool to offset longevity risk. “Statistics Canada estimates the number of centenarians in Canada at 63,700 in 2056,” says Nathalie Tremblay, Individual Living Benefits Product Manager at Desjardins Insurance, told The Insurance and Investment Journal in an interview. “There were 5,825 in 2011 and only three in 1900. Studies show that half the babies born in 2013 may live to age 100. We're living longer and longer and we can’t all expect to stay healthy. The chances of not being sick at the end of one's life are relatively slim.”
Despite this evidence, the traditional long-term care product is slow to take off. “$1.4 billion in individual life insurance premiums were sold in Canada in 2012, compared with only $9 million in long-term care insurance premiums. Critical illness premiums stood at $120 million versus $80 million in disability insurance in 2012,” Ms. Tremblay points out. She obtained these figures from LIMRA reports.
With long experience in living benefits to her credit, Tremblay has joined the growing number of specialists who think it would definitely take a combined product to revive the growth of LTC. Themed “Living until 100 without being a burden, it’s possible!” The insurer's campaign is sparking enthusiasm among advisors, Ms. Tremblay says.
They particularly appreciate that the combo eases risk selection in long-term care insurance because of its life insurance component. “Selection is based on life insurance requirements. If your customer is accepted as standard in life insurance, they automatically qualify for the Independence Option. This means they will not have to be interviewed by telephone or take a screening cognitive test or memory exercises,” she explains
Advisors are already very familiar with life insurance products, Tremblay continues. They are also pleased to find out that the addition of the Independence Option raises the product’s cost by only about 15% on average
Desjardins Insurance is aware that most Canadians aspire to remain at home for as long as possible. The insurer describes the launch as the very first life insurance policy that includes a monthly annuity for home care and long-term care. Desjardins also mentions daily care in its promotional materials, steering clear of the term loss of independence. This is a more delicate way to approach this topic, the insurer says.
The LTC-life hybrid is distributed by the independent network of Desjardins Insurances (the SFL network in Quebec and DFSIN outside Quebec. The product is also available in the Desjardins caisse network under the name Vision Accelerated Independence Option.
Desjardins Insurance is offering advisors a launch promotion: a 25% bonus on the first-year commission for this product until Dec. 31.