Tim Fuller

President, SRS Inc.

Tim Fuller is President of SRS Inc., a full-service IMO (Independent Marketing Organization) and BGA (Brokerage General Agency) that has connected independent financial professionals with life, annuity, disability income, and long-term care solutions from 60+ carrier partners for more than 50 years. Tim and the SRS team specialize in impaired-risk underwriting, advanced case design, and helping advisors place the cases other IMOs turn away.

Life InsuranceImpaired RiskLong-Term CareDisability IncomeAdvanced MarketsUnderwriting

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Simplified Issue vs. Full Underwriting for Disability Insurance: Which to Use

September 25, 2026June 23, 2021 by Tim Fuller

Professional working confidently at her desk, representing disability income protection

Disability underwriting has a reputation for being slow and invasive. Simplified issue programs change that for many clients, but they’re not always the best choice. Here’s how to decide.

Key takeaways

Simplified issue DI can require no exam, labs, or tax returns, just an application and a short phone interview.
Some policies issue within about 48 hours of the interview.
One program allows business owners 50 and under up to $25,000 a month combined: $15,000 of BOE plus $10,000 of individual DI.

No exam, no blood, no tax returns — a 15-minute phone interview, and the policy can be issued in about 48 hours.

How simplified issue works

After the application is submitted, the client completes a phone interview of about 15 minutes. With no exam, blood, urine, or tax returns required (financial documents may still be needed in some states, such as California), policies can often be issued within about 48 hours. Coverage is typically non-cancelable and guaranteed renewable to 65.

What’s available

One program lets business owners age 50 and under buy up to $15,000 a month of business overhead expense coverage plus $10,000 a month of individual protection, a total of $25,000 of monthly benefit, with issue ages to 64. Simplified limits are usually lower for older ages and some occupations.

When to use simplified issue

Healthy clients who need coverage quickly or dislike exams
Business owners with group LTD caps below 60% of pay
Supplementing existing coverage within simplified limits

When full underwriting is better

Benefits above simplified issue limits
Clients who want the richest contract provisions or lowest price available
Clients with health history that may be rated or excluded; full underwriting can sometimes produce a better result

See seven things to know about underwriting DI cases.

Frequently asked questions

What is simplified issue disability insurance?

Coverage issued with limited underwriting, often just an application and phone interview, without exams, labs, or tax returns.

How fast can simplified issue disability insurance be issued?

Often within about 48 hours after the phone interview.

Is simplified issue disability insurance more expensive?

Not necessarily, but benefit limits are lower, and fully underwritten policies may offer better pricing or provisions for some clients.

50+ Years in Business60+ Top-Rated Carriers★★★★★ Rated by Advisors

Reviewed by Tim Fuller on 2026-09-25

Tim Fuller

President, SRS Inc.

Tim leads SRS Inc., a full-service IMO (Independent Marketing Organization) and BGA (Brokerage General Agency), connecting independent financial professionals with life, annuity, disability income, and long-term care solutions from 60+ carrier partners.

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Golden Handcuffs: Vesting Schedules in Executive Bonus Plans

September 26, 2026June 22, 2021 by Tim Fuller

Advisor and client reviewing an advanced markets estate planning strategy in a private office

A Section 162 executive bonus plan is one of the simplest ways to reward key employees. Its biggest drawback has always been control: the executive owns the policy and can walk away with it. A vesting-style repayment schedule and a restriction endorsement can add the “golden handcuffs” employers want.

Key takeaways

In a basic 162 plan, the employer pays the premium as a deductible bonus and the executive owns the policy.
A repayment obligation that phases out over time creates a vesting schedule without turning the plan into split dollar.
A restriction endorsement filed with the carrier limits the executive’s access to the policy during the vesting period.

The loss-of-control problem can be reduced, if not eliminated, with two simple features.

Why executive bonus plans are getting attention

Qualified plans have non-discrimination limits. Deferred compensation and split dollar plans can involve significant regulation, administration and reporting. The Section 162 executive bonus plan stands out for its simplicity: the employer pays the premium, deducts it as compensation and reports it as income to the executive, who owns the policy.

The catch is that if the executive leaves, the policy, and the employer’s investment, goes with them.

Feature 1: A repayment schedule that vests

The bonus agreement can require the executive to repay some or all of the bonuses if they leave early. The obligation typically phases out over time, for example a declining percentage each year, creating a vesting schedule similar to repayment terms on relocation expenses.

Because the employer has no interest in the policy, the plan doesn’t drift into split dollar territory. And because no compensation is deferred, the deferred compensation rules generally don’t apply. Clients should have their legal advisor draft the agreement.

Feature 2: A restriction endorsement

A restriction on the owner’s rights can be filed with the carrier. For the agreed period, the executive can’t surrender, borrow from or change the policy (other than the beneficiary) without the employer’s consent. That locks the policy down and gives the employer time to enforce its right to recover premiums if needed. Availability of restriction endorsements varies by carrier.

Designing the plan

Vesting schedules work well alongside other design choices, such as whether the employer also bonuses the tax. See our article on single vs. double bonus plans. Many designs use cash value products; we also cover funding executive bonus plans with indexed UL.

We provide case design, documentation and presentation support. Contact us to discuss a business owner client.

Frequently asked questions

What is a golden handcuff in an executive bonus plan?

It is a provision, usually a repayment obligation and a policy access restriction, that encourages a key employee to stay by making early departure costly.

Does a repayment schedule make the plan split dollar?

Not if the employer has no ownership interest in the policy. The repayment is a contractual obligation between employer and employee.

Is the executive bonus deductible to the employer?

Generally yes, as reasonable compensation. The bonus is taxable income to the executive. Clients should confirm with their tax advisor.

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Reviewed by Tim Fuller on 2026-09-26

Tim Fuller

President, SRS Inc.

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Life Events That Should Trigger a Life Insurance Coverage Review

September 26, 2026June 21, 2021 by Tim Fuller

Clients’ lives change every year, but they rarely stop to think about life insurance when they do. A new home, a new baby or a promotion changes what they need, and it falls to the advisor to notice. A simple review process tied to life events keeps clients properly covered and opens new conversations.

Key takeaways

Buying a home, having a child, marriage, divorce and promotions all commonly change a client’s coverage needs.
Some carriers let recently insured clients add coverage at the same underwriting class for a limited time.
Reviews can also uncover older policies with cash value that could buy more guaranteed death benefit through a 1035 exchange.

When life changes, most people think about their day-to-day life, not about how much life insurance they need.

Life events that change coverage needs

Buying a home. A new mortgage raises the amount a family would need to stay in place.
A birth or adoption. More dependents and more years of support.
Marriage or divorce. New obligations, and beneficiary designations that may need updating.
A promotion or raise. More income to replace. See our article on income multiples for sizing coverage.
Starting or buying a business. New debts and key person needs.
A death in the family or new caregiving role.

Adding coverage at the same rate class

Clients who bought coverage recently sometimes want more. One carrier we work with lets clients add a new policy at the same underwriting class as a recently placed policy. The amount available depends on how long ago the coverage was placed and the approved rating. Contact us to check whether a client may qualify, and confirm current program availability.

Reviewing existing coverage for value

A review is also a chance to make sure a client’s current coverage is still cost-effective. A client with substantial cash value who only needs death benefit protection may be able to use a 1035 exchange into a new policy, paying the same premium for a higher guaranteed death benefit. Carrier upgrade programs are another option to explore.

Make reviews a system

The key is having a system: ask about life changes at every meeting, send annual review reminders and track key dates. Our Policy Review Kit includes sample approach letters and talking points. Contact us for a copy or for help with any policy review.

Frequently asked questions

How often should clients review their life insurance?

At least every few years and after any major life event, such as marriage, divorce, a birth, a home purchase or a significant income change.

Can a client add coverage without new underwriting?

Sometimes. Some carriers allow recently insured clients to add coverage at the same rate class within limits. Riders such as guaranteed insurability may also allow increases.

What is a 1035 exchange?

A tax-free exchange of one life insurance policy for another under Section 1035 of the tax code, which can let clients move cash value into a more suitable policy.

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Reviewed by Tim Fuller on 2026-09-26

Tim Fuller

President, SRS Inc.

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Life Insurance After Thyroid Cancer: Preferred Rates Are Possible

September 25, 2026June 18, 2021 by Tim Fuller

Thyroid cancer diagnoses have increased as screening finds smaller tumors earlier. The most common type has an excellent prognosis, and some carriers underwrite it far more favorably than others.

Key takeaways

Papillary carcinoma is the most common thyroid cancer and has a good prognosis, particularly under age 50.
Underwriters look at type, stage, treatment, time since treatment, and regular follow-up.
A 43-year-old woman treated for stage I papillary thyroid cancer two years earlier may qualify for Preferred Non-Tobacco.

Stage I papillary thyroid cancer, treated two years ago — and the client may still qualify for Preferred Non-Tobacco.

About thyroid cancer

The thyroid is a butterfly-shaped gland at the base of the neck that produces hormones regulating heart rate, blood pressure, body temperature, and weight. Thyroid cancer occurs when abnormal cells grow in the gland. Better imaging now finds small cancers that might once have gone undetected, which is part of why diagnoses have increased.

What underwriters look at

The type of thyroid cancer matters most. Papillary carcinoma, the most common type, has a good prognosis. Underwriters also weigh the stage, the treatment received, how long ago it ended, and whether the client keeps up with regular follow-up.

Case study

Female, age 43, non-smoker
Stage I papillary thyroid cancer, diagnosed and treated two years ago
Regular physician follow-up

May qualify for: Preferred Non-Tobacco.

How to prepare the case

Collect the pathology report, treatment details (surgery, radioactive iodine), and recent follow-up results. Our Underwriting Team can pre-screen the file and point you to the carrier most favorable for this history. For other cancer histories, see how a client got Standard on $3 million after prostate cancer.

Frequently asked questions

Can you get life insurance after thyroid cancer?

Yes. Early-stage papillary thyroid cancer is often very favorably underwritten, and some carriers may offer Preferred rates.

How long after thyroid cancer treatment can you apply?

It depends on type, stage, and carrier. In the case above, the client was two years past treatment and may qualify for Preferred.

Does thyroid hormone medication affect life insurance?

Replacement hormone after thyroid removal is expected and generally isn’t a concern on its own.

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Reviewed by Tim Fuller on 2026-09-25

Tim Fuller

President, SRS Inc.

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The Cost of Waiting to Buy Long-Term Care Insurance

September 25, 2026June 17, 2021 by Tim Fuller

Most clients believe they won’t be among the roughly 70% of people who need long-term care, so they put off buying coverage. Waiting has a real price.

Key takeaways

Age and health are the two biggest factors in long-term care pricing and eligibility.
Waiting even five years can mean higher premiums, more underwriting, and less chance of qualifying for preferred rates.
A health change during the wait can make coverage unavailable at any price.

The best premium your client will ever get for long-term care coverage is the one available today.

Why waiting costs more

Premiums are based largely on age at purchase and health. Every year of delay raises the base rate, and every new diagnosis can reduce the rate class or lead to a decline. Preferred health discounts are much easier to get in a client’s 50s than in their 60s.

Show the numbers

Run two quotes side by side: today, and five years from now at the same benefit. Clients can see the premium difference, and the total paid over time, for themselves. Then remind them that the second quote assumes their health stays the same.

The bigger risk: not qualifying

LTC underwriting focuses on future care risk, so conditions that seem minor, such as joint problems, certain medications, or early memory concerns, can lead to a decline. Buying while healthy locks in insurability. For clients in their 40s and 50s, see selling LTC to clients aged 45–55.

Frequently asked questions

Does long-term care insurance get more expensive with age?

Yes. Premiums are based on age at purchase, and health changes over time can raise rates or lead to a decline.

What is the best age to buy long-term care insurance?

Many advisors suggest the early to mid 50s, when premiums are lower and clients are more likely to qualify for better rates.

Can you be denied long-term care insurance?

Yes. LTC underwriting is strict, and conditions affecting mobility, cognition, or future care needs can lead to a decline.

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Reviewed by Tim Fuller on 2026-09-25

Tim Fuller

President, SRS Inc.

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Critical Illness Insurance: Bridging the Financial Gap Health Insurance Leaves

September 26, 2026June 16, 2021 by Tim Fuller

A heart attack, stroke or cancer diagnosis can create serious financial strain even for clients with good health insurance. Out-of-pocket maximums, time away from work and ongoing household bills tend to arrive all at once. Critical illness insurance is designed to cushion exactly that moment.

Key takeaways

Health insurance pays medical providers; it does not replace lost income or cover the household bills that keep coming.
Critical illness insurance pays a lump sum on diagnosis of a covered condition such as cancer, heart attack or stroke.
Clients are far more likely to survive a serious illness before 65 than to die before 65, so the conversation belongs next to life and disability planning.

Most advisors protect clients against dying too soon. Far fewer protect them against surviving a serious illness with a pile of bills.

Why health insurance alone isn’t enough

Many families live close to paycheck to paycheck, with limited emergency savings. Even a solid health plan typically carries an out-of-pocket maximum of several thousand dollars, and a serious illness will usually hit it. At the same time, treatment and recovery often mean weeks or months away from work.

That combination of medical costs, lost income and ongoing household expenses is a perfect storm. Medical bills are consistently cited as a leading contributor to personal bankruptcy filings in the U.S., and having health insurance does not by itself prevent that hardship.

How critical illness insurance works

Critical illness coverage pays a lump-sum benefit when the insured is diagnosed with a condition listed in the policy. Covered conditions commonly include:

Cancer
Heart attack
Stroke
Other serious conditions named in the contract, which vary by carrier

Because the benefit is paid directly to the client, it can be used for anything: deductibles, travel for treatment, a mortgage payment, or simply replacing a spouse’s income while they act as caregiver. Individually owned benefits are generally received income-tax free; clients should confirm their situation with a tax advisor.

Where it fits alongside life and disability coverage

Life insurance protects the family if the breadwinner doesn’t make it home. Disability income insurance replaces a share of income over a longer period, after an elimination period. Critical illness fills a different gap: fast cash at diagnosis, when expenses spike and before other benefits may start.

For clients who can’t qualify for or afford full disability coverage, critical illness can be a meaningful partial solution. For clients who already own DI, it adds a layer of liquidity. Our article on income protection covers the disability side of the conversation.

Starting the conversation with clients

No advisor wants to learn that a client suffered a stroke and realize the topic never came up. A simple approach is to raise critical illness during every annual review and every new life or DI sale:

Ask how the household would handle three to six months of reduced income plus medical bills.
Review the client’s health plan deductible and out-of-pocket maximum.
Show a lump-sum benefit amount that would cover that gap.

Our DI and critical illness specialists can help you compare plans, covered conditions and pricing across carriers. Contact us for help with your next case.

Frequently asked questions

What does critical illness insurance cover?

It pays a lump sum when the insured is diagnosed with a covered condition, commonly cancer, heart attack and stroke. The exact list of conditions and definitions varies by carrier and policy.

Is a critical illness benefit taxable?

Benefits from an individually owned policy paid with after-tax premiums are generally received income-tax free. Employer-paid arrangements can differ, so clients should confirm with a tax advisor.

Does critical illness insurance replace disability insurance?

No. Disability insurance replaces a portion of income over time, while critical illness pays a one-time lump sum at diagnosis. They work best together, though critical illness can help clients who can’t qualify for full DI.

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Reviewed by Tim Fuller on 2026-09-26

Tim Fuller

President, SRS Inc.

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Life Insurance and Irrevocable Trusts: What to Do When the Trust Isn’t Ready

September 26, 2026June 15, 2021 by Tim Fuller

Many large life insurance cases are meant to be owned by an irrevocable trust, and the trust is often the last piece to come together. Clients understandably don’t want to pay for a trust until they know they’re insurable. That leaves advisors managing a carrier deadline they don’t fully control.

Key takeaways

Underwriting can start before the trust exists by listing the owner and beneficiary as “trust TBD” and submitting a corrected application before issue.
If the trust isn’t ready at delivery, having the insured own the policy and later sell it to a grantor trust avoids the three-year look-back and transfer-for-value problems.
Using a “surrogate owner” who later gifts the policy is risky and can create gift or estate tax exposure.

The best fix is prevention: once a medical offer makes the trust necessary, hire an attorney who commits in writing to a timeline.

How trust-owned cases usually unfold

The typical sequence looks like this:

The client applies and waits for an offer before spending money on legal work.
Once the offer arrives, the client meets with an attorney to decide what they want.
The attorney drafts the trust, often slower than anyone expected.
The carrier’s offer deadline approaches, and the trust still isn’t signed.

Sometimes an extension buys time. Sometimes it doesn’t. Planning for this from the start keeps a good offer from slipping away.

Starting underwriting before the trust exists

There’s no need to wait for the trust to begin processing and underwriting. Have the proposed insured (who will also be the trust’s grantor) sign the application as insured, and show the owner and beneficiary as “trust TBD.”

Because the application becomes part of the policy, a new ownership page (Part I) will be needed before issue, once the trust is established. The trustee signs as owner and the trust is named as beneficiary.

If the trust isn’t done by the delivery deadline

Two common approaches come up when the deadline arrives first:

Insured owns, then sells to a grantor trust. The insured accepts the policy personally and later sells it to the trust. Because it’s a sale rather than a gift, the three-year look-back for gifted policies doesn’t apply, and because the buyer is a grantor trust, transfer-for-value is generally not an issue. Our article on grantor trusts explains why.
Surrogate owner who later gifts the policy. Someone else owns the policy temporarily and is expected to gift it to the trust. This is risky: nothing guarantees the surrogate will make the gift, and if the insured dies early the proceeds may not end up where intended. Gift or estate tax consequences can follow.

Either path should be reviewed with the client’s attorney and tax advisor before delivery.

Preventing the problem in the first place

As soon as a medical offer makes the trust necessary, encourage the client to engage an estate planning attorney who will confirm in writing that the documents will be ready in time. Share the carrier’s delivery deadline with the attorney early.

Our Advanced Markets team helps with cases involving insurance in all types of trusts, including irrevocable, revocable, charitable and special needs trusts. Contact us before the deadline gets tight.

Frequently asked questions

Can I submit a life insurance application before the ILIT is signed?

Yes. The insured can sign as proposed insured with owner and beneficiary shown as “trust TBD.” A corrected ownership section is submitted once the trust exists and before the policy is issued.

Does selling a policy to a grantor trust trigger the three-year rule?

The three-year look-back applies to gifted policies. A bona fide sale to the insured’s grantor trust generally avoids it, and the grantor trust exception typically avoids transfer-for-value. Confirm with counsel.

Why is a surrogate owner risky?

The surrogate has legal ownership and no binding obligation to gift the policy on time. If the insured dies first, the proceeds may go to the wrong party and create gift or estate tax problems.

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Reviewed by Tim Fuller on 2026-09-26

Tim Fuller

President, SRS Inc.

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Using Life Insurance to Supplement Retirement Income

September 26, 2026June 14, 2021 by Tim Fuller

Many clients worry that Social Security and employer plans won’t fully fund the retirement they want. Qualified plans and IRAs help, but contribution and income limits cap what they can do. Properly structured permanent life insurance can add another source of retirement income while protecting the family along the way.

Key takeaways

Qualified plans and IRAs are valuable but limited by contribution caps, income limits and employer availability.
Permanent life insurance provides a death benefit during working years and cash value clients can access in retirement through withdrawals and loans.
An optional long-term care rider can let the same policy help pay for a qualifying LTC event.

One policy can protect the family during working years, supplement income in retirement, and help with long-term care if it’s needed.

The retirement income gap

Clients increasingly understand they’ll need to fund more of retirement themselves. The usual tools all have limits:

401(k)s and similar plans are excellent but capped, and only available if an employer offers one.
Traditional and Roth IRAs have contribution limits, and Roth eligibility phases out at higher incomes.
Social Security and pensions may not cover the lifestyle clients expect.

Clients who have maxed these options, or can’t use them, need somewhere else to save.

How cash value life insurance helps

Properly structured permanent life insurance offers several benefits in one contract:

During working years, the death benefit replaces income and pays off debt so the family can maintain its standard of living.
Cash value grows tax-deferred inside the policy.
In retirement, clients can access cash value through withdrawals and policy loans, which can be income-tax free when the policy is not a modified endowment contract and remains in force.

Design matters. Funding level, product type and loan strategy all affect results. Our article on using RMDs in life insurance sales shows another way retirement assets and life insurance work together.

Adding long-term care protection

Many permanent policies can include a long-term care or chronic illness rider that accelerates the death benefit to help pay for qualifying care. For clients worried that an extended care event could drain their retirement savings, this can be an efficient way to address two risks with one premium. See our overview of the LTC rider for how these riders typically work.

Which clients are a good fit

This strategy tends to suit clients who:

Already contribute the maximum to qualified plans, or don’t have access to one
Earn too much to contribute directly to a Roth IRA
Have a genuine need for life insurance protection
Can commit to funding the policy consistently for a number of years

Our Life Sales team can help you design and illustrate a policy for your client’s goals. Contact us to get started.

Frequently asked questions

Can life insurance really provide retirement income?

Yes, when properly structured. Clients can access cash value through withdrawals and loans. Loans and withdrawals reduce the death benefit and cash value, and a lapse with loans outstanding can create taxes, so design and monitoring matter.

Are policy loans taxable?

Loans from a policy that is not a modified endowment contract are generally not taxable while the policy stays in force. If the policy lapses or is surrendered with a loan, taxable gain can result.

Is this a replacement for a 401(k)?

No. It’s a supplement, usually best after clients have taken advantage of employer matches and other qualified options, and only when there is also a need for life insurance.

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Reviewed by Tim Fuller on 2026-09-26

Tim Fuller

President, SRS Inc.

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Sleep Apnea and Life Insurance: How CPAP Compliance Earns Preferred Rates

September 25, 2026June 11, 2021 by Tim Fuller

Untreated sleep apnea can lead to high blood pressure, stroke, heart failure, diabetes, and depression, so underwriters take it seriously. But successfully treated sleep apnea, proven with follow-up testing and CPAP compliance, can still earn Preferred.

Key takeaways

Mild sleep apnea (apnea index below 20, oxygen saturation above 80%) may qualify for all Preferred classes if treatment is successful.
More severe cases may still reach Standard Plus or Preferred with successful treatment.
Proof of success means a follow-up sleep study and documented CPAP compliance.

Apnea index of 30 before treatment, 2 after, with documented CPAP use: Preferred Non-Tobacco on $2 million.

How severity is considered

At one carrier, mild sleep apnea (apnea index below 20 and oxygen saturation above 80% on the sleep study) can qualify for all Preferred classes if treatment is successful. More severe cases may qualify for Standard Plus or Preferred when treatment is proven effective. For more on severity scoring, see placing sleep apnea cases.

Case study

50-year-old male small business owner applying for $2 million of term
Non-smoker, no tobacco in 30 years, no adverse family history
Fatigue five years ago led to a sleep study: apnea index 30, oxygen saturation 80%; CPAP recommended
Follow-up study 18 months later: apnea index 2, oxygen saturation 98%
Documented CPAP compliance, no symptoms, normal EKG and labs, cholesterol 185 (ratio 2.3)

Decision: Preferred Non-Tobacco.

What to submit

Include the original sleep study, the follow-up study showing improvement, and CPAP compliance reports downloaded from the machine. Together they prove the treatment works and is being used.

Frequently asked questions

How do I prove CPAP compliance for life insurance?

Most CPAP machines record nightly use; a compliance report from the machine or the doctor’s office documents it.

Can severe sleep apnea get Preferred life insurance rates?

With successful treatment proven by a follow-up sleep study and CPAP compliance, some carriers may offer Preferred.

Why does a follow-up sleep study help?

It shows the treatment is working, which is what underwriters care about most.

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Reviewed by Tim Fuller on 2026-09-25

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President, SRS Inc.

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Hybrid Long-Term Care Annuities: An LTC Solution for Clients Over 70

September 25, 2026June 10, 2021 by Tim Fuller

Many clients in their 70s and 80s want long-term care protection but can’t qualify for traditional coverage or don’t want to pay premiums they may never use. Many of them also own nonqualified annuities they never plan to annuitize. A hybrid LTC annuity can connect the two.

Key takeaways

Hybrid LTC annuities typically have easier underwriting than traditional LTC insurance, making them a fit for clients about 70–85.
Under the Pension Protection Act, existing nonqualified annuities can be exchanged tax-free (1035) into qualifying LTC annuities.
Qualified LTC benefits from these contracts are generally received income-tax-free; if care is never needed, the value passes to beneficiaries.

Many clients hold an annuity as an emergency fund for “if I ever need help.” A hybrid LTC annuity puts a tax-efficient plan behind that intention.

The long-term care catch-22

Americans 85 and older are among the fastest-growing age groups, yet few are prepared for a care event. Older clients often can’t qualify for traditional LTC coverage, find it too expensive, or don’t want to pay for something they may not use.

Why nonqualified annuity owners are ideal candidates

Most nonqualified deferred annuities are bought for tax-deferred growth and never annuitized. Ask these clients what would cause them to spend the money. Many say it’s an emergency fund in case they need help someday. Using it for care directly, though, can trigger taxes on the gain.

How the Pension Protection Act helps

Since 2010, provisions of the Pension Protection Act of 2006 allow:

Tax-free 1035 exchanges from an existing annuity into a qualifying annuity with LTC benefits
Qualified LTC benefits from these contracts to be received generally income-tax-free, even when funded by the annuity’s gain
Charges for the LTC coverage to reduce the contract’s cost basis rather than being treated as taxable withdrawals

Only qualifying products receive this treatment, so product selection matters. Confirm specifics with a tax advisor.

Easier underwriting

Hybrid LTC annuities usually have simpler underwriting than traditional LTC insurance, which makes coverage available to clients who might otherwise be declined. If care is never needed, the annuity value passes to beneficiaries. For life-based alternatives, see asset-based LTC client profiles.

Frequently asked questions

What is a hybrid long-term care annuity?

An annuity that provides a multiple of its value for qualified long-term care expenses, with any remaining value passing to beneficiaries.

Can I exchange an existing annuity for long-term care coverage?

Yes. The Pension Protection Act allows tax-free 1035 exchanges into qualifying annuities with LTC benefits.

Is it easier to qualify for an LTC annuity than LTC insurance?

Usually. Hybrid LTC annuities often have simplified underwriting, making them an option for older clients.

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Reviewed by Tim Fuller on 2026-09-25

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Simplified Issue vs. Full Underwriting for Disability Insurance: Which to Use

How simplified issue works

What’s available

When to use simplified issue

When full underwriting is better

Frequently asked questions

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Why executive bonus plans are getting attention

Feature 1: A repayment schedule that vests

Feature 2: A restriction endorsement

Designing the plan

Frequently asked questions

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