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As more baby boomers reach retirement age, the demand for new way of planning for
long term care expenses is increasing. The insurance industry is responding not
just with enhancements to traditional Long Term Care insurance, but also by the
introduction of modified Annuity and Life products. Those considering long term
care life or long term care annuities products should consult with their financial
advisor and/or agent before making any decision about what product best meets their
needs.
For several years life insurance companies have made available riders to life policies
that allow for an early pay-out of benefits if the policy holder is diagnosed with
a terminal illness. Some companies are now offering products which allow an early
pay-out of benefits if the policy holder becomes “chronically ill” and is unable
to perform a certain number of activities of daily living (ADL's). Some important
features and factors to consider regarding Long Term Care Life products include:
- Premiums are generally paid in a lump sum, often as an “add-on” benefit to an existing
life insurance policy.
- Benefits payable for long term care expenses are generally 5 to 6 times the lump
sum premium paid.
- Benefits paid for long term care expenses are paid tax free.
- That portion of the death benefit not used to pay long term care expenses remains
to be paid out as a tax-free death benefit.
- To qualify, you must pass both the health underwriting requirement of a traditional
life insurance product and those of a traditional long term care policy.
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Long term care annuities, like traditional annuities, have both an accumulation
or deferral phase and a pay-out phase. Long term care annuities differ is that the
pay-out phase can be accelerated when the annuity holder is in need of long term
care services. Some important features and factors to consider regarding Long Term
Care Life products include:
- Holders of traditional annuities no longer subject to surrender charges can generally
transfer funds to a tax free to long term care annuity.
- Purchasers of long term care annuities are not subject to as rigorous of health
underwriting as for long term care life or traditional long term care insurance.
- In addition to accelerating the pay-out of accumulated account value, an increase
in the benefit is generally triggered, extending the pay-out period to pay for long
term care expenses.
- Payments made under the long term care benefit may be limited to actual long term
care expenses incurred.
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