Overdue Change May Revolution Insurance Industry
Porter, Sylvia, THE JOURNAL RECORD
It's an overdue change in the concept of life insurance that may revolutionize the industry.
Some insurers call it ``accelerated death benefits.'' To Prudential Life, it's ``living benefits.''
Simply put, it means you can use your life insurance death benefits before you die, provided you are terminally ill.
Prudential claims to have originated the concept and introduced it in Canada in 1989. In January 1990, the company began offering it in the United States.
Accelerated benefits are not yet widely available, but scores of companies have followed Prudential's lead, including such major players as John Hancock, The Travelers, Connecticut Mutual and Nationwide Life.
Traditionalists object that paying out benefits before the insured dies violates the basic concept of life insurance, which is to create an instant estate for the spouse or another beneficiary. Insurers, however, have violated the concept befre, sometimes to their sorrow.
Yet, ``living benefits'' appears to be a workable marketing innovation. It offers the insurers a powerful sales tool for traditional whole life or permanent insurance. At the same time, it has the potential to bring financial and emotional relief to millions of policyholders.
The concept at least partially fulfills the unrealized role of Medicare's aborted ``catastrophic care benefits'' program, which was passed and then repealed by Congress - although insurers say that is not its intention. It does not fulfill the function of long-term care insurance, which is a specific health insurance policy with no death benefits. But, again, it is being sold by some insurers as a substitute for long-term care policies.
With nursing home care as high as $50,000 a year, the face value of most life policies would not cover the cost of an extended stay.
Prudential reports that about half the claims it has paid so far were to terminally ill cancer patients. About 25 percent have been to AIDS patients. The company now has liberalized its rules and will make the payout to patients scheduled for an organ transplant.
A woman in Florida planned and paid for her own funeral, paid all her outstanding bills and then died serene, knowing there was nothing left behind for others to handle. …