Leverage Life Insurance When Planning for Longevity

Living benefit riders offer utility to address needs as clients age

by Rod Rishel

Mr. Rishel serves as Chief Executive Officer, Life Insurance, American International Group (AIG). He can be reached at

Football’s Big Game played this month to an estimated audience of 111.3 million.1 Nearly twice as many people – 88 percent of the adult American population – watched the Great American Solar Eclipse on Aug. 21, 2017 in some fashion.2 Yet, only about 20 percent of American workers have tried to figure out how much they’ll need for retirement and only 10 percent have established a formal retirement plan.3

That’s where you come in.

By leveraging innovative life insurance products with accelerated benefit riders, you have the opportunity to help clients prepare for protection and, potentially, income in retirement to mitigate the financial risks of aging. These perils include the impacts of longevity, chronic illness and severe cognitive impairment (such as Alzheimer’s disease).

Many Americans aren’t sure how to tackle such challenges, but some of today’s life insurance solutions have been built to address them head-on. Let’s examine the longevity issue first.

The longevity challenge

A recent survey of 3,000 working-age adults about issues they must grapple with in planning for retirement revealed that longevity risk was the least understood. As an article published on the Time magazine website shared, “Only a third of those surveyed knew how long their assets might last, and only half had actually planned for the possibility of a longer-than-expected life.”4

It’s not that consumers don’t want to be prepared. The LIMRA Secure Retirement Institute has found that three-fourths of workers understand they need to save for retirement and, furthermore, most want to do so through their employers.5 However, most American workers do not have the opportunity to save through the workplace via payroll deduction. Fewer than half of employers offer a defined contribution plan and fewer still – only 8 percent of employers – offer a defined benefit (pension) plan.6

The good news is that a variety of financial solutions can help respond to client needs for income in retirement. But, not all products are also designed to provide death benefit protection. One notable exception is a recently updated guaranteed universal life (GUL) insurance solution, coupled with an included or available “lifestyle income” rider.

Income for a long retirement

As part of an overall balanced retirement plan, this solution may help make clients’ extra years more satisfying. Beginning at age 85 (if the policy has been in force for at least 15 years), the rider enables the insured to translate the contract’s death benefit into a stream of supplemental income that he or she can use for any purpose.

The rider provides guaranteed withdrawal benefits, regardless of the cash surrender value under the policy. Furthermore, the payments made through the rider typically are tax-free (based on current federal income tax law) up to the amount of cumulative premiums. Any remaining death benefit will be paid to the policy’s beneficiaries.

Clients can be assured that their family members will be protected, their business interests will live on, or their charitable giving initiatives will be served, all thanks to the proceeds from the policy.

Income if chronic illness occurs

If the client suffers a qualifying sickness anytime during the life of the GUL insurance policy and is covered by a built-in or an optional chronic illness rider, he or she will have access to the contract’s tax-free death benefit through pre-determined monthly payments, for as long as illness continues or until the death benefit is exhausted. At the insured’s death, the remaining benefit will be paid to the policy’s beneficiaries.

For flexibility and to help meet needs, the rider offers insureds a choice of three benefit payment options, depending on the rider elected, including:

  • the IRS maximum per diem (for 2018, the maximum is $3607),
  • 2 percent of rider benefit per month, or
  • 4 percent of the rider benefit per month
most American workers do not have the opportunity to save through the workplace via payroll deduction. Fewer than half of employers offer a defined contribution plan and fewer still – 8%– offer a defined benefit (pension) plan

Given that four in 10 recently surveyed retirees said they were experiencing higher health care costs than they’d expected prior to leaving their jobs,8 the potential of the chronic illness rider to provide supplemental income may come as welcome news to many clients.

Flexible policy design

The design of the GUL insurance solution empowers clients to structure a premium payment plan that matches their own personal needs and budgets. They can choose the number of years or age to which they want the death benefit guaranteed. Then, they can elect to pay premiums over the life of the policy, pay additional premium to potentially shorten the payment period or simply pre-fund the coverage guarantee.

If clients’ needs change or they no longer want life insurance coverage, they can surrender the policy in year 20 and receive 50 percent of premiums paid or in year 25 and receive 100 percent of premiums paid, up to 40 percent of the face amount.

If needs evolve, policy holders also have the opportunity to reduce the death benefit while maintaining the original coverage guarantee period. Just keep in mind that this feature proportionately reduces the death benefit, cash values and guaranteed premiums.

Time for action

As you’re looking over your client list for anyone who may need an annual financial review, consider those who may need life insurance protection, or more of it, and how you could educate them about the role that hybrid products with living benefit riders are designed to serve. It’s never too soon for people to start planning for their own longevity, and new online carrier tools can help you engage effectively with clients and prospects of any generation.

Furthermore, research by LIMRA’s Secure Retirement Institute has shown that consumers who have formal written plans for retirement are more likely to have favorable retirement outcomes.9 If you know people who spend more time watching the annual NFL championship game – or observing the moon glide between Earth and the sun – than on planning for the future, it’s time to talk about aging and the challenges it can bring. A GUL insurance product with accelerated benefit riders may be just the right fit for protection and retirement income. ◊



1. “Super Bowl LI Draws 111.3 Million TV Viewers, 190.8 Million Social Media Interactions;” Nielsen; Feb. 6, 2017;
2. Jonah Engel Bromwich; “215 Million Americans Watched the Solar Eclipse, Study Finds;” The New York Times; Sept. 27, 2017;
3. Andrew Soergel; “Many Americans Think They Need $1M for Retirement, Half Have Less Than $25K;” U.S. News and World Report L.P.; March 21, 2017;
4. Walter Updegrave; “Here’s How to Make Sure You Have a Worry-Free Retirement;” Time Inc.; Nov. 29, 2017;
5. “Workplace retirement plans are a highly valued benefit;” LIMRA Secure Retirement Institute; March 2017;
6. “Establishments offering retirement and healthcare benefits;” Bureau of Labor Statistics data table; March 2017;
7. “Internal Revenue Bulletin: 2017-45;” Part IV, Rev. Proc. 201758, §3.55; Internal Revenue Service; Nov. 6, 2017; “Rev. Proc. 2017-58”
8. LIMRA Secure Retirement Institute: Expectations vs. Reality – More than a Quarter of U.S. Retirees Underestimated Basic Living Expenses in Retirement;” LIMRA; Oct. 16, 2017;
9. Ibid.