15 minute read
Industry Insights: Permanent Life Insurance
By Heather and Trevor Garbers
This is the 20th Anniversary of Life Insurance Awareness Month, created by Life Happens to educate more people about the importance of life insurance to protect their loved ones financially. This year’s theme is “Life Insurance: For Anyone Who Lives. You might wonder if life insurance is worth it since you won’t be there to use it. But the truth is, life insurance isn’t for the people who die It’s for the people who live. From paying bills and the mortgage or rent, to funds for college and retirement, life insurance is for so much more than a funeral. And many don’t know that life insurance can come with living benefits, including funds you can use while you’re alive to do things like buy a home, supplement your retirement income, cover an emergency expense and more.”
There is a fair amount of attention paid by employers and the insurance industry to the importance of offering Basic and Group Term Life Insurance today. In light of that, we would like to align our focus in this article to the importance of permanent life insurance and the living benefits that these plans can offer. We have brought in some life insurance experts including: Dan Kraft, Vice President, Product & Innovation at Trustmark; Russ Norris, Head of Worksite Distribution Strategy, MassMutual; Domenic M Salvato (Dom), Head of Large Market Sales & Distribution, Employee Benefits, Transamerica, and Janet Buzil, SVP Product Delivery Innovation and Delivery, Chubb Workplace Benefits to get their insights on permanent life insurance in the voluntary/workplace benefits market today.
Please provide a short summary of your permanent life insurance offering:
Dan - Trustmark offers three unique permanent life insurance solutions. All plans can be offered as a hybrid solution that includes highly sought benefits for care services. These care benefits can be offered with extension of benefits and full death benefit restoration riders to double or even triple the value of a policy. In addition, all can be offered on a guaranteed issue basis, are fully portable and are backed by Trustmark’s reputation for responsive service:
Trustmark Universal LifeEvents® is a Universal Life plan that offers the unique feature of reducing the death benefit later in the life of the policyholder. This makes for a cost-effective solution to maximize coverage during working years and, since long-term care benefits are tied to the face amount, this lets policyholders maximize their long-term care protection as well.
Trustmark Universal Life is another Universal Life plan that follows a more standard design. Along with our LifeEvents product, it includes an option for long term care benefits, builds cash value and allows for death benefit and premium adjustments to give policyholders a blend of security and flexibility.
Our new Trustmark Life + Care is a permanent life product to 121 with guaranteed rates and guaranteed benefits. It offers an added level of certainty while also giving flexibility in care benefits; policyholders can receive care benefits for both professional and family caregiving.
Russ- Mass Mutual offers a Group Whole Life insurance plan with a guaranteed death benefit, a guaranteed premium and guaranteed cash value. In addition, our Group Whole Life is participating permanent life insurance, meaning that the certificate is eligible to receive dividends each year, beginning on the certificate’s second anniversary. Although they are not guaranteed, MassMutual has paid dividends to eligible participating policy/certificate owners every year since 1869. Dividends can even be used to purchase additional paid-up coverage without evidence of insurability required.
Janet - Our Lifetime Benefit Term (LBT) is a unique, industry-leading permanent life insurance plan with a Guaranteed Death Benefit and Living Benefits for Long Term Care. Life Insurance premiums will never increase, and as along as premium is paid, there will always be a death benefit. Death benefits can be taken early and tripled to supplement the cost of Long-Term Care, including the only 75-month payment of LTC Benefits in the permanent life insurance market. After receiving 75 months of LTC benefits, beneficiaries can receive $50,000 through our Restoration benefit. For example, coverage with a $100,000 Face Amount can pay out $350,000. LBT is fully portable and permanent, and can never lapse through age 121 as long as premiums are paid as due.
Dom - As part of our flexible suite of solutions, we offer two different types of permanent life insurance, universal and whole life insurance. Transamerica’s permanent life insurance policies are available in face amounts ranging from $10,000 to $500,000. Both offer a cash value component that grows tax-deferred until funds are withdrawn, and they can also be offered with one of our living benefits and/or extension of benefits or restoration riders. We do not have reduction in benefits provisions at any age and offer generous guaranteed issue amounts of up to $200,000. Universal life insurance also offers the flexibility to change the amount and frequency of premium payments, as long as there is sufficient cash value in the policy to cover monthly deductions*. Finally, our universal life insurance can be designed to last until age 120.
What is trending in the world of employer based permanent life insurance today?
Janet– An aging population and dramatically rising long term care (LTC) costs are driving the focus of states to propose and develop publicly funded LTC programs to relieve the future financial pressure on state Medicaid programs. This is fueling sales of hybrid Life and LTC products, such as LifeTime Benefit Term Insurance, as private carrier solutions that can help.
Dom - There is a strong trend toward positioning hybrid permanent life insurance to help plan for the potential need for long term care services. This insurance not only provides a death benefit if the insured should pass, but it could also include optional living benefits for extended care needs. Many employees realize the need to plan for long term care, but haven’t done it yet or don’t know where to start, so brokers and employers have an opportunity to provide solutions for these unmet market needs. In fact, in a recent Transamerica survey, 45% of participants said they plan to use insurance to pay for this type of care, but only 22% said they had extended care insurance.
Cost of insurance and care services, as well as access to coverage, are key contributors to the delay in getting this protection. States are also looking for ways to help protect their residents from these costs. This is a good opportunity to build more competitive benefits packages and help employees better prepare for the potential financial and health concerns they may face.
Dan - One of the most exciting trends we are seeing is an increased understanding of the need for supplemental life insurance In a competitive job market, employers understand that their benefits package can make a difference in landing the hires they need to support their business. While it’s been undervalued in the past, that’s not the case anymore. We are also seeing employers take a more involved approach to how they offer their life insurance. Most are pairing a voluntary offering with an employer-paid plan. Or, alternatively, they’ll offer an employer-funded plan with a buy-up. Either way, life insurance is moving more and more into a central role when employers are weighing their benefits package.
Russ – We are seeing employers increasingly prioritizing the financial well-being of their employees driving a need for more comprehensive benefits that enhance their workforce’s financial security for the long term. Another prevailing trend is clearly the interest and attention placed on living benefits offered through permanent life products. Our GWL has what’s called a Chronic Care Benefit, that is automatically included with coverage. So if a certificate owner should experience a qualified chronic illness, they can access this benefit. Some of the perks that come along with it include: an immediate lump sum payout (in most states), there is no plan of care required, there is no additional premium or underwriting (there is only a cost if the benefit is exercised), there are no conditions on how that money is spent, and on top of all that if the benefit is never used, they never pay for it.
What are differentiators for permanent life insurance in our marketplace today?
Dom - Helping employers provide the benefits that meet their employees’ unique needs. For example, permanent life carriers that can provide multiple living benefit solutions to help with extended care needs. Most notably is the ability for insurers to offer benefits that would allow the policyholder to pay for caregiving received from family members, friends, neighbors, or anyone of their choosing, as opposed to institutionalization. Over the last decade we’ve seen significant changes in the long term care landscape and more employees looking for guidance now and in retirement. In the same Transamerica survey mentioned above, 29% of those that have thought about their extended care needs want in home care by a licensed/certified caregiver, while 25% would prefer family caregiving. Ultimately, a significant differentiator for permanent life, or any other benefit, is also ease of execution. We partner with benefit admin systems to host our products so employees can easily enroll with a simple one-click process, just like their other benefits.
Janet - Because of the growing interest in hybrid insurance plans with coverage for both Life and Long-Term Care, certain features of hybrid life insurance plans can be real differentiators in the market. This includes things like a tax qualified LTC Benefit that complies with section 7702B of the tax code and may satisfy future state mandates as Qualified Long-Term Care Guarantees also truly matter for this type of product:
Guaranteed Rates – Plans that have level Life Insurance premiums that are guaranteed never to increase are extremely important for the long term. This ensures coverage is affordable and can stay in place when you need it most – at advanced ages when the need for long term care increases.
Guaranteed Death Benefits – Coverages like LBT that do not have automatic reductions due to age or have guarantees around minimum death benefits are critical. Access to funds for long term care is based on the amount of death benefit under the policy. Again, you want a policy that provides coverage when you need it most - at advanced ages when the need for long term care increases.
Guaranteed Issue and Portability – Flexible guaranteed issue underwriting limits and guaranteed portability for this benefit really make this accessible coverage and coverage that can last a lifetime. Employees can take their LBT coverage with them, even if they change jobs
Dan - Given the growing need for long term care amongst our population and the swirl of discussion around long term care legislation, long term care benefits are a huge differentiator. But, more importantly, it’s not just offering options for long term care, it’s how those benefits are offered that makes a difference. Can you extend the care benefits? Are you able to fully and immediately restore the policy’s death benefit if it’s advanced for care? Will care benefits ever be reduced? Will long term care rates ever change?
Life insurance is, in many ways, a straightforward product. At Trustmark, we are strong believers in the value we provide by adjusting coverage to life needs over time. A reduction in death benefit in later years (while care remains level) helps control costs so policyholders can maximize those important care benefits.
What methods have you seen yield the most success when it comes to enrolling & educating employees in these plans?
Dom - Education Offering the right benefit solutions, supported by ongoing education, communications, and planning tools will help employees make informed decisions and get the most value out of their benefits. Unlike term life insurance, permanent life has more complexities that need more explanation. One-on-one consultations, group meetings, and access to trained call center representatives, typically lead to more successful enrollments with higher participation than the average we tend to see for self-service enrollments. We’ve also received terrific feedback on our decision support tools because they are simple for employees to understand. Including sample scenarios for each product in communication materials to help explain how an employee could qualify for benefits and how those benefits would be paid is also helpful in addition to, positioning universal life insurance after term life on the benefit admin platform with a clear description of the unique benefits it offers vs term life.
Janet - Benefits communication and education today requires a full omni-channel approach to reach the most generationally complex and diverse workforce in history. This means reaching the employee population through every channel available – at home, in the workplace, email, Intranet, Internet, and more – and requires a high degree of relevance, or personalization.
We’ve seen significant increases in enrollment engagement and participation when we work together with the employer to create a co-branded and custom approach, catered to the professions and industry of the audience. We’ve also seen, like communications, advantages in supporting multiple enrollment methods – online self-service, telephonic and in-person. In today’s diverse workforce, with post-pandemic hybrid and work from home models more frequent, our ability to reach and engage employees requires more flexibility and choice.
Dan - Consumer expectations are changing. The trend, not just in insurance, is ease of access. We’ve all become used to an easy customer experience, short and sweet messaging and fewer administrative hiccups – the benefits world is no exception.
With that in mind, there’s a trend towards effective digital communication for employees surrounding enrollment (effective being the key word there). Concise, engaging email, video, text message and web resources are a must.
While its effectiveness in contrast to other methods can be questioned, we can’t deny that self-service enrollment has become more common, and the use of self-service only heightens the importance of effective communication and effective enrollment experiences.
On top of that, administration is trending towards simplicity as well. More and more, we’re seeing employers go with an ACH billing model; carriers are deducting payments directly from policyholders’ bank accounts and bypassing the billing process for employers. It simplifies the life of the employer, uses a familiar process for employees and pays dividends on the back end in terms of portability and policy retention.
Russ: The highest level of success in enrolling and educating employees in voluntary benefits has been achieved through benefits brokers and their clients who are completely engaged and involved. It’s often the result of one or more of the following methods:
Access to employee data to help inform generational and life-cycle messaging
Multi-channel communications focused on awareness and education
Real-time support in the form of group meetings, one-on-one meetings, and informed call center representatives
Online enrollment with flexible options
Considerations for off-cycle enrollment periods
From the Author: Permanent Life Insurance options have been around for decades but their recent resurgence in importance through workplace benefits can be attributed to:
Renewed interest in supporting employees by providing robust financial wellness resources and offering them benefits that allow them to customize their employers’ offerings to their unique needs.
Advances in technology that assist in the communication, enrollment, and administration functions.
Carriers enhancing their plans to fit the growing needs of the market. As you collaborate with your clients to provide them with robust benefit strategies to assist in the recruitment, retention, and wellbeing of their employee population, don’t forget this valuable benefit, their beneficiary may thank you one day.
Dan Kraft, Vice President, Product & Innovation at Trustmark - Dan joined Trustmark in 2014 and has over 30 years of experience in product management, marketing, and sales. Dan oversees the product development and innovation team, which is responsible for incorporating the voice of the customer and staying abreast of the latest market trends to deliver valuable solutions to Trustmark customers. Dan received a bachelor’s degree in business administration from Marquette University in Milwaukee, and an MBA from DePaul University in Chicago.
Domenic M. Salvato, Head of Large Market Sales & Distribution, Employee Benefits, Transamerica - Dom brings 25 years of group benefits experience and focuses on developing relationships with national and regional health consulting firms to drive Transamerica’s value proposition. His sales team focuses on providing employee benefit solutions to consultants with clients over 2,000 eligible employees.
Russ Norris, Head of Worksite Distribution Strategy, MassMutual - Russ is driven by a personal passion to improve the financial well-being of every working American by helping them be prepared for the unexpected. He has led the Worksite Distribution Strategy at MassMutual Worksite since 2019 and has over 25 years of financial services experience.
Janet Buzil, SVP Product Delivery Innovation and Delivery, Chubb Workplace - leads the organization’s product team for all distribution channels. She oversees strategy, d marketing, and enablement across Combined in the US and Canada, and for Chubb Benefits (CWB). Janet joined the company more than a decade ago, previously serving as CWB’s Vice President of Marketing and Product Development. Janet earned a Bachelor of Arts from Columbia College and a Master of Business Administration from Northwestern University’s Kellogg School of Management.
*Adjusting the premium of a universal life insurance policy could result in over- or under-funding the policy As a result, the life of the policy could be affected
1. In using the term “permanent,” it is important to note that the insurance could lapse prior to the maturity date based on the planned periodic premiums, guaranteed interest rate and guaranteed cost of insurance charges, or for non-payment of premium
2. Survey of Existing Transamerica Policyholders conducted from December 28, 2022 January 8, 2023
3. The Chronic Care Benefit is neither long term care, nursing- home, or home care insurance and is not conditioned upon the receipt of longterm care or medical services
