Sun Life Develops Long Term Care Plans
By Marius | Published July 04, 2011
Canadian insurer, Sun Life Financial has launched a single premium, whole-life insurance product for its US-based clients with a new linked benefit rider that enables owners to contribute towards vital long-term care. The new policy, named Sun Care Whole Life, can be used to pay towards in-home/assisted-living care or nursing home facilities and will hope to address the substantial number of Americans who are finding themselves unready to cope with the costs of medical treatment after retirement.
A recent study conducted by Sun Life found that almost two thirds of Americans currently do not feel financially prepared to meet the growing costs of late-in-life healthcare (regarding either in-home help, assisted living, or nursing care options) with only 16 percent of respondents actually confident they could handle these financial burdens. According to the study, the most consistent problem mentioned when preparing for late-in-life care has been the lack of understanding most Americans have about what the true costs of said care will be. Even accounting for the most conservative estimates of inflation over the next 30 years, the average cost of long term care calculated was more than double of what respondents were expecting. Medical inflation can be between 2 to 4 times the general inflation in any given country and this was reflected in the results. According to the Consumer Price Index, the current nursing home rate for a private room is US$85,000 and the projected rate by 2030 is US$190,000, not the mere 56 percent rise to US$125,000 most respondents anticipated. The figures also reveal that 24/7 in-home care rate will currently cost US$184,000 a year, and an estimated US$272,000 by 2030 and 40 hour a week in-home care runs US$44,000 a year, rising to $65,000 by 2030. An OECD report issued earlier this year confirmed that aging populations will cause global spending on long-term care to double or even triple by 2050.
Despite the continued development of assisted living and nursing homes in America into more reverent and autonomous healthcare institutions for seniors, the vast majority of those surveyed still wanted to live out their lives in their own homes. Most (83 percent) would prefer to be cared for by their families if the financial burden wasn’t too great, and would object to staying in long-term care facilities even if this option prolonged their life.
Janet Whitehouse, VP and general manager of Sun Life’s Individual Life Insurance Division, explained in a press statement that the insurer had used these interesting statistics about the financial preparedness of many Americans to develop a new type of insurance program. According to the 2008 report from the U.S. Department of Health and Human Services, around 70 percent of American citizens over 65 will eventually require some form of long-term care, often for such necessary daily activities as eating, washing or getting dressed. “We want to help people prepare, so if they ever need long-term care, they have more freedom to pick the level of care that suits their needs, and the costs don’t have to erode their retirement savings or estate assets,” Mrs. Whitehouse, said in the statement.
Through the new Sun Care Whole Life policy, users pay premiums like any other insurance plan, but the collected funds can then be allocated towards either late-in-life care (through assisted living options, nursing homes or in-house care health plans), or the benefits can all be passed on to selected beneficiaries income-tax free once the policyholder passes away. For an additional fee, the whole life policy provides an optional ‘return-of-premium’ feature, which allows holders to recoup the value of their original premium. The plan is currently available in 39 US states.
Sun Life officials assert that the Sun Care Whole Life policyholders and their beneficiaries will get sizeable value out of the contract. The plan estimates to provide long-term care benefit between three to seven times the initial value of the premium, dependent on factors such as riders selected, age, gender and the smoking status of the policyholder. Bob Klein, VP of strategic planning for Sun Life’s Individual Life Insurance Division, detailed that “once the policy owner pays the single premium, the policy is guaranteed to provide a benefit, either to the individual or the beneficiaries.”
This is an improvement over traditional long-term-care or similar life insurance plans, which don’t benefit the holder unless he or she makes a long-term-care claim, require unending premiums or provide no death benefit if a holder never needed long-term care amenities. Making benefit options available while alive gives policyholders’ greater flexibility to act on healthcare bills and assess whether they are eroding planned estate savings.
Bob Klein concluded the statement, encouraging Americans to plan, not panic. “Since being a family caregiver can exact a huge toll, and given average annual nursing home rates projected to rise to $190,000 by 2030, you raise your odds of getting excellent long-term care by planning for it,” he said.
This past week, Sun Life also involved itself in long-term-care issues in the Philippines. The insurer is planning to expand into the country’s emerging retirement planning industry and is sounding out the prospective creation of a stand-alone trust corporation to accomplish this.
Currently only 2 percent of Filipino citizens are financially independent upon retirement. Most retirement plans are provided through employers and Sun Life recognizes the potential for growth in this sector. Without a trust license however, it would be difficult for the insurer to enter this sector because it would be unable to offer competitive returns without the same tax treatment enjoyed by entities with trust functions in the country. Recent regulatory revisions drawn up by the Filipino central bank will allow non-banking institutions to apply for a trust license and Sun Life would now be considering this option.
Sun Life is the second-largest insurance company operating in the Philippines in terms of assets and wants to continue being strong player in the market. In February, the company signed a deal to acquire a 49 percent stake of Filipino insurance business Grepalife Financial Inc., a unit of the Yuchengco Group, for an undisclosed amount, expanding Sunlife distribution network in the Philippines. The deal rebrands Grepalife into Sun Life Grepa Financial as soon as local regulatory approval has been settled. Sun Life’s existing share of the Philippine insurance market is estimated to be around 17-20 percent, but with the new partnership the Canadian insurer is aiming to increase that to more than 25 percent in the short to medium term.
In an interview last week Sun Life CEO Donald Stewart, was upbeat about the company’s business in Asia and described the Philippines in particular as a country with “enormous potential,” remaining among its priority markets for long term success. “We want to make sure we commit to markets where we can succeed in and the Philippines is very much one of these markets,” he added.
Insurance Company Mentioned
Sun Life Financial
Sun Life Financial is an international financial services organization providing a range of protection and wealth accumulation products and services to individuals and corporate customers.