Producer Guide. Income Assurance Immediate Need Annuity. Income Assurance Immediate Need Annuity

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1 Income Assurance Immediate Need Annuity Income Assurance Immediate Need Annuity Producer Guide Issued by Genworth Life Insurance Company, Richmond, VA H 06/15/17 FOR PRODUCER USE ONLY. NOT TO BE REPRODUCED OR SHOWN TO THE PUBLIC.

2 Table of contents Have your clients saved enough?...1 Senior care funding sources...2 Introducing Income Assurance Immediate Need Annuity...3 Benefits and options...4 Different from long term care insurance...5 Case study...6 Product highlights...10 Reasons to recommend...12 Participating producer criteria and recommendations...13 Engaging with other financial professionals...14 Creating centers of influence...15 Appendix: Senior living options...16 Market outlook The median annual cost for care in an assisted living facility is well over $43,000. This cost jumps to more than $80,000 for a semi-private room in a nursing home. 1 65% of Americans say most people need long term care insurance, according to the 2014 Insurance Barometer Study that Life Happens. However, only 13% own it. 2 For people already needing care, it s likely too late to buy long term care insurance. 1 Genworth. Annual Median Cost of Care Across the Nation. Accessed July 23, LIMRA and Life Happens, 2015 Insurance Barometer Study Accessed December 9,

3 Have your clients saved enough? 40% of partially or fully retired individuals worry about outliving their money. 3 Thanks to advances in medicine and healthier lifestyles, many of today s seniors are living longer than past generations. They are enjoying rich lives and spending time volunteering, socializing and traveling. Others, however, may be dealing with chronic conditions and ailments that may be prevalent due to extended longevity. For many retirees, the fear of running out of money is a major source of worry, especially if more significant health issues arise. While it may seem like it s too late to address the potential need for help once a health issue has arisen, it really doesn t have to be. An Income Assurance Immediate Need Annuity allows you to offer a lifetime income solution tailored for clients already in need of or receiving care. As these clients try to adapt to a declining health condition or new diagnosis, this product guarantees lifetime monthly income to use however they wish. With medical underwriting, monthly payouts from this annuity may be larger compared to traditional single premium immediate annuities for individuals who are less healthy and in need of care. The monthly income can be used to pay for living expenses, medical expenses, care services or even hobbies and travel, offering a welcome sense of security. 3 The Future of Retirement Income Study, Genworth, March

4 Senior care funding sources Two out of three caregivers and over half of care recipients used savings or retirement funds for a long term care need. 4 Relying on retirement savings to pay for care expenses may jeopardize a senior s financial future, reduce the income they can draw from savings, undermine the financial legacy they plan to leave their heirs, or impact where they live during the twilight of their life. For a surviving spouse, depleted savings or the sale of a primary residence could mean a major change in lifestyle. For caregivers, using their own savings or retirement funds may strain their long-term financial security. Other sources of senior care funding may include: Medicaid Medicare Family or friends Long term care insurance Other assets such as a house Medicare and Medicaid have limitations related to where care is received, the length of the care and the financial assets of the individual receiving care. Additionally, if the senior is in a care situation, long term care insurance may not be an option. 4 Genworth, Beyond Dollars Study, July

5 Introducing Income Assurance Immediate Need Annuity Income Assurance Immediate Need Annuity is a medically underwritten single premium immediate annuity designed to create a guaranteed monthly income stream for the life of the annuitant. The monthly income payments can be used for any purpose such as living, medical or long term care expenses. With medical underwriting, monthly income payments from an Income Assurance Immediate Need Annuity may be larger for annuitants who are less healthy and in need of care as compared to traditional single premium immediate annuities. Benefits and options Because all situations are different, this solution can be tailored for individual needs. An Income Assurance Immediate Need Annuity provides choices now to help create certainty for the future. Early death benefit An early death benefit feature is included. If the annuitant dies within six months from the contract date, an early death benefit will be paid. The early death benefit is equal to the single premium multiplied by the applicable death benefit percentage (shown in the chart below), less all monthly income paid. Death Benefit Percentage 100% 75% 50% 25% 0% 100 % In Contract Month 1 50 % 25 % 0 % In Contract Month 2-3 In Contract Month 4-6 In Contract Month 7+ 3

6 Benefits and options Two optional benefits are available at issue: Optional Enhanced Death Benefit * The owner can select life income with a protected period of one to five years and receive an enhanced death benefit. If the annuitant dies within the protected period, the enhanced death benefit is the greater of the minimum benefit amount, less monthly income received, and the early death benefit. The minimum benefit amount is the sum of the monthly income payments for the number of months in the selected protected period, excluding any additional prorated amount included in the first monthly payment. Optional Cost of Living Adjustment * The owner, at issue, can select an annual cost of living adjustment (COLA) of 1% to 8%. Monthly income will increase at the rate selected on each contract anniversary, compounded annually. * Optional features are only available at issue and require additional premium to provide the same guaranteed initial monthly income payment. 4

7 Different from long term care insurance Key differentiators Several key differentiators set an Income Assurance Immediate Need Annuity apart from traditional long term care insurance: No triggering event needs to occur for payments to begin Income payments begin immediately There are no claims to file No activities of daily living (ADLs) requirement Income can be used for any purpose, including living and medical expenses Designed for people: Who are concerned about outliving their assets Who need guaranteed income they can t outlive with the flexibility to spend it as they wish Who are less healthy and could benefit from a larger monthly income payment than they would receive from a traditional single premium immediate annuity Who may need care now, or soon, and whose age and health preclude them from long term care insurance coverage options Who may be already receiving care in their home or a facility Who want to use only a portion of their assets to create lifetime income, allowing remaining assets to be left as a legacy Not designed for people: Who are in good health and have other lifetime income options that may provide a better income alternative Who do not need a guaranteed lifetime stream of income Who do not want to risk losing their remaining premium if they die before payouts exceed the initial premium 5

8 Case study Your client, Nancy: a former smoker; age 79 HYPOTHETICAL EXAMPLE Nancy s main concerns are the potential of increasing future expenses and the possibility of outliving her assets. Nancy recently moved into a charming one-bedroom apartment at an assisted living community where she enjoys group activities whenever she can. A former smoker, Nancy has been diagnosed with acute chronic obstructive pulmonary disease (COPD), a progressive condition that makes it difficult for her to breathe. Luckily she can move around the complex with her rolling walker, and ongoing oxygen therapy is not yet required. One of Nancy s concerns stems from a relative who lived in a similar facility, ran out of money due to rising costs, and had to move in with an adult child. Likewise, a neighbor was becoming increasingly forgetful and could no longer manage his medications alone. After he repeatedly became disoriented and wandered out of the complex, he had to be moved to a more expensive memory care facility for safety reasons. Nancy has $125,000 in investments that are managed by her financial professional, Barb. Nancy receives a small monthly income from social security and a pension plan. She also earned $375,000 from the sale of her home and is hoping Barb can recommend a strategy that will allow her to use a portion of these proceeds to help pay future expenses. 6

9 How can Nancy benefit? When Nancy and her grown son, Tom, meet with Barb, they learn about the benefits of an Income Assurance Immediate Need Annuity. This product would allow Nancy to use a portion of her home proceeds to create guaranteed monthly income, with an option to add an annual cost of living adjustment, and the freedom to spend it any way she wants. This may help relieve her concern about the potential for increasing expenses in the future. 7

10 Nancy s options and selection: After she learns about the benefits an Income Assurance Immediate Need Annuity can provide, Nancy tells Barb that she would like $40,000 a year in annualized income that can grow each year to help with her concerns about increasing expenses and the possibility of outliving her money. Barb was able to show Nancy and Tom the estimated single premium that would be needed to create $40,000 of annualized income guaranteed for life from a traditional single premium immediate annuity and a medically underwritten Income Assurance Immediate Need Annuity. During that discussion, Tom and Nancy found that because of the underwriting process, the amount needed to create $40,000 annually was significantly less with an Income Assurance Immediate Need Annuity. She also presented four alternative combinations to help Nancy and Tom compare their options. They select life income with an annual 3% compounded cost of living adjustment and a three-year protected period. They decided that they were ready to take the next step by completing a request for proposal and an application. Nancy selected A Life Income with COLA and Protected Period Single Premium Amount First Year Annualized Income Cost of Living Adjustment (COLA) Protected Period Minimum Benefit Amount $347,698 $40,000 3% compound 3 years $123,636 Hypothetical example. Each Income Assurance Immediate Need Annuity is customized based on the annuitant s age and health underwriting results. Any change in the assumptions or underwriting outcome could result in significantly different results than shown here. 8

11 Examples Nancy selected the Life Income with COLA and Protected Period Based on Nancy s answers to health questions and selections, she would need an estimated single premium of $347,698 to provide $40,000 of annualized income in her first year, with 3% growth built in each year following. Although not all of her premium is guaranteed to be returned, by selecting a three-year protected period she can create a minimum benefit amount of $123,636. Nancy selected After underwriting, Nancy and Tom reviewed the guaranteed proposal and decided they liked what they saw. They accepted the offer, and were comfortable in the knowledge that Nancy would have access to a steady stream of guaranteed monthly income to help cover her expenses for the rest of her life. They understood that payments would end upon her death and that the total benefits might be less than premium paid. 9

12 Product highlights Annuitant Issue Ages Premium Amounts Minimum $50,000 Additional contracts $25,000 Maximum $1,000,000 without home office approval Lifetime Income Income Frequency Optional Cost of Living Adjustment Death Benefit Early Death Benefit Guaranteed monthly income for as long as the annuitant lives. The monthly income payment is determined at the time of underwriting using factors such as age, gender and health of the annuitant along with the income plan chosen and any optional benefits selected. The lifetime income payment can be used for any purpose, including to help: Provide for living expenses Cover medical expenses Offset care expenses Ease family s financial burden Monthly The owner, at issue, can select an annual cost of living adjustment of 1% to 8%. Monthly income will increase at the rate selected on each contract anniversary, compounded annually. An early death benefit will be paid if the annuitant dies within six months from the contract date. An optional enhanced death benefit is available if the owner selects life income with a protected period at issue. An early death benefit will be paid if the annuitant dies within six months from the contract date. The early death benefit is equal to the single premium multiplied by the applicable death benefit percentage (as indicated in the table on the following page), less all monthly income paid. 10

13 Death in contract month Death benefit percentage and after 100% 50% 25% 0% Death Benefit (cont) Optional Enhanced Income Taxes Death Benefit Income Payment Methods Fees / Charges The owner can select life income with a protected period of one to five years at issue and receive an enhanced death benefit. If the annuitant dies within the protected period, the enhanced death benefit is the greater of the minimum benefit amount, less monthly income received, and the early death benefit. The minimum benefit amount is the sum of the monthly income payments for the number of months in the selected protected period, excluding any additional prorated amount included in the first monthly payment. Each income payment generally will be considered part return of principal and part interest. The portion that is considered to be interest generally will be considered taxable income. Once all principal has been returned, payments become fully taxable. If the annuity is funded by qualified money, the full amount of the income payments generally would be taxable. It is important to discuss the tax implications of this product with a qualified tax professional. Payments may be received by electronic funds transfer (EFT) or by check. No fees or sales charges 11

14 Reasons to recommend Benefits to clients and their families Designed to provide a higher monthly income for annuitants who are less healthy and could benefit from a larger monthly income payment than they would likely receive from a traditional single premium immediate annuity Guarantees monthly income for life of the annuitant Helps relieve the stress of worrying about their loved one s finances Helps make the lifestyle and quality of care their loved one needs and deserves attainable Increases likelihood of care recipient staying in their preferred facility Can be used to solve for a specific income goal or can be tailored to an available premium amount Benefits to Producers Allows you to help with a solution specifically tailored for someone who is ill and/or needs care and is looking for guaranteed income to pay for living, medical, or care expenses Helps your clients create a sense of security knowing monthly income payments are guaranteed for life with the flexibility to be used for any purpose Creates potential for greater client loyalty/retention, especially among adult children of annuitants Raises likelihood of involvement of adult children, which creates opportunity for multigenerational long term care planning Provides opportunity to build relationships and network with other financial professionals, senior living facility personnel, real estate agents involved in the sale of clients homes and other specialists who can support these sales 12

15 Participating producer criteria and recommendations Financial professionals participating in the sale of an Income Assurance Immediate Need Annuity must be licensed and appointed with Genworth, in good standing with their Broker General Agency, and agree to complete Genworth training specific to this product. Qualities that will help producers be most successful include: Sensitivity to older adults financial needs; experience working with seniors and their family members Strong networking skills and centers of influence relationships, including other financial professionals, estate planning lawyers, real estate agents, care providers, and others A compassionate, educational, solution-oriented approach Professional and engaging seminar or workshop presentation skills Training will enable producers to: Articulate the features and benefits of an Income Assurance Immediate Need Annuity to clients and others Clearly outline the process from application to delivery and income flow Identify the ideal client profile and understand alternative options Demonstrate sensitivity with clients and their families Develop and execute a prospecting/marketing plan to gain new customers 13

16 Participating producer criteria and recommendations (CONTINUED) Training may include: E-learning self-study modules Webinars In-person training, including senior sensitivity training An e-learning assessment and required NAIC training Engaging with other financial professionals While many prospects may have existing relationships with a financial professional, this product is a unique solution to a growing problem and may not be widely available or even recognized as an option. What s the benefit to the financial professional? Uses a portion of assets to create guaranteed lifetime income while helping to protect other assets under management, allowing them to remain as a legacy Helps position their services as holistic and responsive to client needs, as well as to their family and support network Provides visibility to client s younger family members about the need to create a financial strategy that includes long term care planning 14

17 Creating centers of influence Income Assurance Immediate Need Annuity presents an opportunity for participating producers to build strong centers of influence with other professionals. You can position yourself as a trusted resource with a variety of solutions, including a product for someone who cannot get long term care insurance. When the relationship is mutually beneficial, this also may provide an opportunity to both give and get referrals for other business. 15

18 Appendix: Senior living options Facility Type Care/Services Provided Independent Living Assisted Living Nursing Home or Skilled Care Memory Care Residential Care Home Home Care Respite Care Fully equipped private apartments. Residents use their personal household furnishings. Meals, activities and transportation are provided. Private pay; $1,500 - $3,500/month. 5 Same as independent living facilities with the addition of 24-hour assistance available for activities of daily living (ADLs).* Mostly private pay; $3,600/month. 6 Private or shared rooms with 24/7 skilled nursing care for residents. May offer short-term rehabilitative stays. $6,692/ month semi-private room; $7,604/month private room. 6 24/7 support and structured activities ensure safety and quality of life for dementia and Alzheimer s patients. May be offered at the above facilities or dedicated settings. Private pay, Medicaid; $3,000 - $7,000/month. 5 Private homes that serve residents who live together and receive care from live-in care takers. Assistance with ADLs is typically provided. Private pay, Medicaid; $1,500 - $3,000/ month depending on required services. 5 Seniors remain in their own homes independently while receiving companionship and needed assistance with ADLs, paying bills and other administrative tasks. $3,813/month. 6 Offer short-term stays in a care community to provide a temporary break for primary caregivers or to allow prospective residents to get acquainted with the facility. Private pay, Medicaid; $75 - $150/day 5 *ADLs: Activities of daily living such as eating, bathing, toileting, dressing, transferring (walking), and continence. 5 Source: A Place for Mom, senior care referral service. Senior Housing 101: Senior Care Types Explained. Accessed July 15, senior-housing-options 6 Genworth. Monthly Median Cost of Long Term Care in the Nation. Accessed July 15,

19 Visit genworth.com/incomeassurance Download the latest marketing materials Access the initial estimate in the Quote It! system Get tools that you can share with clients 17

20 Issued by Genworth Life Insurance Company, Richmond, VA Income Assurance Immediate Need Annuity single premium immediate annuities are issued by Genworth Life Insurance Company, Richmond, VA, subject to policy form series GL , ICC15GL3100, et al. Features and benefits may vary by state or market. All guarantees are based on the claims-paying ability of Genworth Life Insurance Company. You should carefully read your contract. This is a brief product description. Consult the annuity contract for a detailed description of benefits, limitations and restrictions. The contract terms and provisions will prevail. The discussion of tax treatments in this material is Genworth s interpretation of current tax law and is not intended as tax advice. You should consult your tax professional regarding your specific situation. Genworth does not make any representations or warranties regarding the impact this annuity may have on Medicaid benefit eligibility or other requirements for Medicaid benefits or any other state or federal government assistance. Optional features are available at issue and require additional premium to provide the same guaranteed initial monthly income payment. Life income provides guaranteed monthly payments during the lifetime of the annuitant, no matter how long he or she lives. Monthly income payments will stop upon the death of the annuitant and therefore the total amount of payments may be significantly less than the premium paid for the annuity. There is no minimum amount of guaranteed income payments. The contract provides an early death benefit if the annuitant dies within the first six months of contract issue. The contract may also provide an enhanced death benefit if, at contract issue, the owner selects life income with an optional protected period. Insurance and annuity products: Are not deposits. Are not guaranteed by a bank or its affiliates. May decrease in value. Are not insured by the FDIC or any other federal government agency Genworth Life Insurance Company. All rights reserved.