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Insurance Abstract
A method includes providing a long-term care insurance product to
an insured, determining a benefit pool associated with the long-term
care insurance product, the benefit pool based on benefits available
to the insured at a future point in time after issuance of the long-term
care insurance product and calculated by number of days of benefit
chosen multiplied by daily benefit chosen increased over time from
issuance until the future point in time by an inflation protection
factor, providing an accelerated benefit rider providing for making
available the benefit pool associated with the insurance product
upon issuance of the product to pay for claims for long-term care,
and providing a return of premium rider wherein the return of premium
rider provides for returning at least a portion of premiums paid
by the insured upon election of the insured provided such election
is made before occurrence of a future event.
Insurance Claims
1. A method for a long-term care insurance product including a benefit
increase rider, the method comprising: providing a long-term care
insurance product having a benefit increase rider to an insured;
determining a benefit pool associated with the long-term care insurance
product, the benefit pool based on benefits available to the insured
at a future point in time after issuance of the long-term care insurance
product and calculated by number of days of benefit chosen multiplied
by daily benefit chosen increased over time from issuance until
the future point in time by an inflation protection factor; making
available the benefit pool associated with the insurance product
upon issuance of the product to pay for claims for long-term care.
2. The method of claim 1 wherein the inflation protection factor
is compounded over time.
3. The method of claim 1 wherein the inflation protection factor
is a simple increase over time.
4. The method of claim 1 wherein the inflation protection factor
is 5 percent compounded annually.
5. The method of claim 1 wherein the point in time is defined by
the insured reaching age 85.
6. The method of claim 1 wherein the long-term care insurance product
further comprises a return of premium rider wherein the return of
premium rider provides for returning at least a portion of premiums
paid by the insured upon election of the insured provided such election
is made before occurrence of a future event.
7. The method of claim 6 wherein the future event is associated
with the insured attaining 75 years of age.
8. The method of claim 6 wherein the return of premium rider further
provides for increasing the benefit pool if the insured does not
make the election.
9. The method of claim 1 further comprising maintaining an electronic
record indicative of the benefit pool and claims paid from the benefit
pool.
10. The method of claim 1 further comprising providing an output
indicative of a remaining benefit pool, the remaining benefit pool
being the benefit pool less claims paid from the benefit pool.
11. A method for a long-term care insurance product including a
benefit increase rider, the method comprising: providing a long-term
care insurance product having a benefit increase rider to an insured;
determining a benefit pool associated with the long-term care insurance
product, the benefit pool based on benefits available to the insured
at a future point in time after issuance of the long-term care insurance
product and calculated by number of days of benefit chosen multiplied
by daily benefit chosen increased over time from issuance until
the future point in time by an inflation protection factor; providing
an accelerated benefit rider providing for making available the
benefit pool associated with the insurance product upon issuance
of the product to pay for claims for long-term care; and providing
a return of premium rider wherein the return of premium rider provides
for returning at least a portion of premiums paid by the insured
upon election of the insured provided such election is made before
occurrence of a future event.
12. The method of claim 11 wherein the inflation protection factor
is compounded over time.
13. The method of claim 11 wherein the point in time is defined
by the insured reaching age 85.
14. The method of claim 11 wherein the future event is associated
with the insured attaining 75 years of age.
15. The method of claim 11 wherein if the election is not made,
increasing the benefit pool by at least a portion of premiums paid
after occurrence of the future event.
16. The method of claim 11 further comprising maintaining an electronic
record indicative of the benefit pool and claims paid from the benefit
pool.
17. The method of claim 11 further comprising providing an output
indicative of a remaining benefit pool, the remaining benefit pool
being the benefit pool less claims paid from the benefit pool.
18. An insurance product including a benefit increase rider, the
insurance product comprising: an accelerated benefit rider; a return
of premium rider; wherein the accelerated benefit rider provides
for: (a) determining a benefit pool associated with the insurance
product, the benefit pool based on benefits available to the insured
at a future point in time after issuance of the insurance product
and calculated by number of days of benefit chosen multiplied by
daily benefit chosen increased over time from issuance until the
future point in time by an inflation protection factor; (b) providing
an accelerated benefit rider providing for making available the
benefit pool associated with the insurance product upon issuance
of the product to pay for claims; wherein the return of premium
rider provides for returning at least a portion of premiums paid
by the insured upon election of the insured, provided such election
is made before occurrence of a future event.
19. The insurance product of claim 18 wherein the insurance product
being illustrated by an output from a computer.
Insurance Description
FIELD OF THE INVENTION
[0001] The present invention relates to insurance for long term
care. More particularly, the present invention relates to acceleration
benefit and return of premium riders.
BACKGROUND OF THE INVENTION
[0002] Long term care is a significant and well-recognized problem.
Generally, long-term care includes medical, personal, and/or social
services needed to meet basic living requirements for an extended
period of time. Long-term care is usually provided with a caregiver
within the home or through a nursing home or an assisted living
facility. According to one estimate of The National Association
of Insurance Commissioners, there is a 41 percent chance that those
over age 65 will spend an average of 2.5 years in a nursing home.
Although Medicare may pay a benefit for a portion of a stay (i.e.
100 days), this projected average is far longer in length and is
a significant financial burden.
[0003] Insurance products are designed to leverage a future random
risk. Although the potential incidence of utilizing a long term
care insurance product is fairly high, claims do not however normally
occur until late in the product's ownership. Specifically, for example,
nursing home populations are not statistically significant until
the early to mid eighties. However, because the cost of ownership
of the product increases with age as you near the proximity of the
claim, it is very important to buy at younger ages.
[0004] Thus, at some level, people, particularly those in their
50s have recognized the need for appropriate insurance to provide
benefits in the event of the need for long term care. Ideally, customers
would like to obtain insurance policies for long term care that
have lifetime benefits or unlimited benefits. Such a policy would
mean that they do not have to worry about their coverage ending
before their illness does. The problem with such an insurance product
is that pricing on unlimited benefits has made long-term care insurance
affordable only to the very affluent. Therefore, because of the
expense of long term care insurance, most customers need to compromise
on their insurance and the way in which they do so is by electing
insurance which limits the benefit period. The most common benefit
period that customers buy is between three to five years. However,
despite buying the insurance, the customers still remain exposed
to catastrophically long risk as a tradeoff for cost savings.
[0005] Recognition of the risks that remain even with the purchase
of a long-term care insurance policy, if such policy is less than
one that provides lifetime benefits, many simply choose not to purchase
long-term care insurance. They can not afford policies which provide
lifetime benefits. They determine that long-term care insurance
with less than lifetime benefits does not hold enough value in relation
to cost.
[0006] With long-term care insurance, it is important for customers
to buy before they experience significant changes in health which
could increase the cost or prevent access entirely. Therefore the
best time to buy is often in one's fifties when costs can be established
at a lower level and medical underwriting is not a problem. The
best scenario for long-term care ownership is for one to buy in
their fifties with possible claims occurring in one's eighties.
There is a significant gap in time then between when one should
purchase a policy and when claims may occur. The greater the real
and perceived distance to the claim, the more difficult it is to
convince a consumer to buy in a timely manner. Thus there are difficulties
in selling long-term care insurance to customers.
[0007] Another reason why customers may choose not to purchase
a long-term care insurance policy is that they recognize that if
they change their minds about their need for such a policy in the
future, there is no mechanism for them to receive any money back
for the premiums which they have paid. Where customers are already
questioning the value of tong-term insurance with less than lifetime
benefits and can not afford long-term care insurance with lifetime
benefits, the inability to receive money back serves as an additional
disincentive to buy such insurance. It is recognized that some prior
art health care policies may provide non-forfeiture benefits. Such
non-forfeiture benefits pay premiums back to a designee of the insured
upon death of the insured minus any claims that have been made.
Thus, some type of money back situation is achieved. Of course,
in such a policy, although premiums are not lost if claims are not
made, the insured receives no benefit from the premiums in their
lifetime and there is no mechanism for the insured to receive any
money back in their lifetime. Thus, the disincentive to purchasing
such policies remains.
[0008] Another problem facing the long-term care insurance industry
is that policies have become increasingly complex and it is often
unclear to consumers, even sophisticated consumers, of the relationship
between the price and the primary benefit of the policy. This problem
is due in part to the inability of insurance companies to fully
recognize and appreciate the problems of customers and customer
objections to current long term health care policies and how to
provide a policy that addresses these problems, overcomes these
objections, and is still economically viable for the insurance companies.
Thus, in attempts to increase their business, the long-term care
insurance industry has attempted to adapt and adjust their offerings
to accommodate customers. However, it is believed that these attempts
have not dealt with the actual problems and objections, but have
merely complicated product offerings to a point where customers
are not aware of the problems and objections.
[0009] Therefore, what is needed is improved insurance product
which recognizes and manages these problems.
BRIEF SUMMARY OF THE INVENTION
[0010] Therefore, it is a primary object, feature, or advantage
of the present invention to improve upon the availability of insurance
for long term care.
[0011] A further object, feature, or advantage of the present invention
is to make long term care insurance affordable.
[0012] Another object, feature, or advantage of the present invention
is to make policies for long term care which are easily explainable
to customers and potential customers and readily understandable
by customers and potential customers.
[0013] It is a further object, feature, or advantage of the present
invention to provide a policy for long term care which provides
the insured with greater protection against a potential catastrophic
early claim at a younger age.
[0014] Another object, feature, or advantage of the present invention
is to provide a guaranteed renewable rider which can be added to
a long term care policy which provides for either compound automatic
benefit increase or simple automatic benefit increase.
[0015] Yet another object, feature, or advantage of the present
invention is to provide a rider for a long term care policy which
provides for return of premium.
[0016] Yet another object, feature, or advantage of the present
invention is to provide a rider for a long term care policy which
provides for a return of premium in a manner which benefits the
customer during the lifetime of the customer.
[0017] A still further object, feature, or advantage of the present
invention is to provide a long term care insurance policy which
is attractive to customers as it has immediate benefit.
[0018] One or more of these and/or other objects, features, or
advantages of the present invention will become apparent from the
specification and claims that follow.
[0019] According to one aspect of the present invention, a method
includes providing a long-term care insurance product having a benefit
increase rider to an insured. The method further includes determining
a benefit pool associated with the long-term care insurance product.
The benefit pool is based on benefits available to the insured at
a future point in time after issuance of the long-term care insurance
product and calculated by number of days of benefit chosen multiplied
by daily benefit chosen increased over time from issuance until
the future point in time by an inflation protection factor. According
to the method, the benefit pool associated with the insurance product
is made available to the insured upon issuance of the product to
pay for claims for long-term care. The inflation protection factor
may be a simple increase over time or may be compounded over time.
The point in time may be defined as a future age of the insured,
such as age 85.
[0020] The long-term care insurance product may further include
a return of premium rider. The return of premium rider provides
for returning at least a portion of premiums paid by the insured
upon election of the insured provided such election is made before
occurrence of a future event. The future event may be the insured's
attainment of a particular age, such as age 75. The return of premium
rider further provides for increasing the benefit pool if the insured
does not make the election. A computer system may be used to administer
the product such as by maintaining an electronic record indicative
of the benefit pool and claims paid from the benefit pool or other
administrative information. The computer system may also provide
outputs of these electronic records.
[0021] According to another aspect of the present invention, an
insurance product including a benefit increase rider is provided.
The insurance product includes an accelerated benefit rider and
a return of premium rider. The accelerated benefit rider provides
for determining a benefit pool associated with the insurance product,
the benefit pool based on benefits available to the insured at a
future point in time after issuance of the insurance product and
calculated by number of days of benefit chosen multiplied by daily
benefit chosen increased over time from issuance until the future
point in time by an inflation protection factor, and providing an
accelerated benefit rider providing for making available the benefit
pool associated with the insurance product upon issuance of the
product to pay for claims. The return of premium rider provides
for returning at least a portion of premiums paid by the insured
upon election of the insured, provided such election is made before
occurrence of a future event. The insurance product may be administered
by a computer. The insurance product may be illustrated by a policy
illustration output from a computer.
BRIEF DESCRIPTION OF THE DRAWINGS
[0022] FIG. 1 is a pictorial representation of an insurance policy
of the present invention.
[0023] FIG. 2 is a block diagram illustrating one embodiment of
a system for administering an insurance product of the present invention.
[0024] FIG. 3 is a flow diagram illustrating one embodiment of
a methodology of the present invention.
[0025] FIG. 4 is a flow diagram illustrating another embodiment
of a methodology of the present invention.
[0026] FIG. 5A-5D provide benefit illustrations according to exemplary
embodiments of the present invention.
DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENT
[0027] The present invention provides for two types of riders to
be used with a long-term care insurance policy. The first type of
rider is a maximum lifetime benefit acceleration rider. The second
type of rider is a return of premium rider. Each of these riders
when used alone or together provide significant advantages to a
long-term care insurance policy.
[0028] FIG. 1 provides a pictorial representation of one embodiment
of an insurance product of the present invention. As shown in FIG.
1, a long-term care insurance policy 10 has an associated return
of premium rider 12 and an associated accelerated benefit rider
14.
[0029] The accelerated benefit rider 14 provides a compromise for
target buyers, such as those in their 50's by creating a benefit
pool of money that would equal approximately 15-20 years of benefits
in the event of a claim very soon after purchases, grading down
to the three to five years of benefit pool by the time they reach
the more typical claim age of 80-85. This is accomplished for a
cost that is much closer to the cost of 3-5 year benefits only,
than to the cost of lifetime benefits, thereby making the accelerated
benefit rider affordable for the majority of customers that opt
for 3-5 year benefits that is the most they can afford.
[0030] The accelerated benefit rider eliminates consumer concern
about purchasing a long-term insurance product with less than lifetime
benefits by providing an immediate benefit equal to the amount the
policy would be worth at a set age, (such as 85), based on the inflation
factor that they purchase the policy with at time of issue.
[0031] The accelerated benefit rider is preferably always sold
in combination with policies that include either 5 percent simple
or compound benefit increase riders. Therefore, as an example, the
underlying policy benefit with 5 percent compound inflation grows
from $100 per day at age 55 when issued to $412 per day at age 85.
Therefore, a 5 year benefit policy has a benefit pool of $182,500
when issued at age 55. At age 85, the benefit pool equals $751,900.
The accelerated benefit rider provides the additional dollars necessary
to make the benefit pool that will be available at age 85 ($751,900)
available from the beginning when issued at age 55, and maintaining
the total benefit pool level at that amount until age 85. Essentially
the rider dollars decrease as the underlying policy benefit increases
due to the compound inflation rider. At age 85, the benefit from
the rider has dissipated and the premium charged for the rider terminates.
[0032] The accelerated benefit rider differs from other insurance
products as there is no other benefit like it available in the long-term
care insurance industry. All limited benefit policies offered in
the market today can only provide a benefit pool at issue equal
to the daily benefit at issue times the length of the benefit period
($100 per day .times.5 years, for $182,500 in the example). The
policy of the present invention with the accelerated benefit rider,
can provide much greater protection against that potential catastrophic
early claim at the younger age (55), at a cost much closer to the
regular limited benefit cost than to the lifetime benefit cost.
It therefore provides a solution for a price sensitive segment of
the market that would not otherwise be able to cover the early catastrophic
claim portion of their total risk.
[0033] The rider immediately increases, at the time of issue, to
the policy's maximum lifetime benefit amount to the amount that
will be in effect at attained age (such as 85) according to the
benefits increase rider. The rider need not affect the maximum daily
benefit or any daily home and community-based care benefit if such
benefits are included.
[0034] One methodology for providing the accelerated benefit rider
14 is shown in FIG. 3. As shown in FIG. 3, step 30 is to provide
a long-term care insurance product having a benefit increase rider
to an insured. Step 32 is to determine a benefit pool associated
with the long-term care insurance product. Step 34 is to make available
the benefit pool associated with the insurance product upon issuance
of the product to pay for claims for long-term care.
[0035] Returning to FIG. 1, note that the insurance product 10
can include the return of premium rider or value rider 12. The return
of premium rider 12 can potentially extend the benefit payment of
the policy many years beyond the benefit period chosen depending
on the client's age of issue and age of claim.
[0036] The rider pays a return of premium benefit upon termination
of the policy for any reason before an attained age (such as 75).
Such an age is selected to be less than the age where claims are
usually encountered. The amount of the benefit returned is equal
to a percentage of total premiums paid less the amount of any incurred
claims paid or payable under the policy and other riders (excluding
the return of premium rider) from the effective date to the date
of termination. The below table provides one example of the manner
in which the percentages of premium returned can be set. TABLE-US-00001
If termination occurs Percentage During the first 3 years 0% During
the 4.sup.th year 40% During the 5.sup.th year 50% During the 6.sup.th
year 60% During the 7.sup.th year 70% During the 8.sup.th year 80%
During the 9.sup.th year 90% Between the start of the 10.sup.th
100% year and age 75 During or after age 75 0%
[0037] In addition, after age 75, total premiums paid since the
effective date are added to the maximum lifetime benefit of the
policy. Preferably once effective this rider cannot be terminated
unless the policy is also terminated. It is important to appreciate
that with this rider, the customer does not lose their premiums.
Assuming, in this example, that they maintain the policy for 10
years they can receive their premium back. After age 75, the total
premiums paid are added to the maximum lifetime benefit of the policy,
so they are directly receiving benefit from subsequent premium payments.
[0038] FIG. 4 illustrates one embodiment of a methodology for a
return of premium rider 12. In FIG. 4, step 40, the methodology
is to provide a return of premium rider associated with a long-term
care insurance product which provides for returning at least a portion
of premiums paid by the insured upon election of the insured provided
such election is made before occurrence of a future event. Next
in step 42, there the opportunity for an election to be made during
the term of the policy but before the future event. If the election
is made, then in step 46, at least a portion of the premiums are
returned. If the election is not made, then in step 44, benefits
are increased by additional premiums. It is preferred that the benefits
are increased by increasing the number of days of benefits under
the policy, however, the present invention contemplates that the
benefits could be increased in other ways, such as by increasing
the daily benefit.
[0039] FIG. 2 illustrates one embodiment of a computer-implemented
system of the present invention. In FIG. 2, a database 20 with policy
information is operatively connected to a policy administration
computer system 22. The policy administration computer system 22
is in operative communication with one or more of the insured 24.
It is to be understood that policy information can include premium
payment information, claim information, or other types of information
associated with administering an insurance policy. It is to be further
understood that the operative communication between the policy administration
computer system 22 and the insured 24 need not be direct communication
but can be through any number of intermediaries.
[0040] FIG. 5A-5D illustrate policy illustrations according to
various embodiments of the present invention. FIG. 5A provides a
policy illustration for a long term care policy without an acceleration
rider or a return of premium rider. FIG. 5B provides a policy illustration
for a long term care policy with an acceleration rider and with
compound inflation. FIG. 5C provides a policy illustration for a
long term care policy with a return of premium rider an no acceleration
rider. FIG. 5D provides a policy illustration for a long term care
policy with an acceleration rider and a return of premium rider
and with compound inflation. That which is shown is merely exemplary
and the present invention is not to be limited by these policy illustrations.
It is to be further understood that these policy illustrations are
created using the assistance of a computer.
[0041] Therefore, an insurance produce and a methods for providing
an insurance product have been described. It is to be understood
that the present invention is not to be limited to the specific
description provided herein, as the present invention contemplates
numerous variations within its spirit and scope. The present invention
contemplates variations in the type of insurance product or policy,
whether or not a benefit increase rider is provided (and if so,
its type), and other variations all within the spirit and scope
of the invention.
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