Many people set aside substantial funds for retirement. Most worry that a long term care event can ruin their plans to use those funds. Alternatively, many consumers are reluctant to purchase a standalone Long Term Care policy, for fear their investment will be given up if they don’t use it.
The provisions of the Pension Protection Act (PPA) of 2006 permits tax-free distribution of life insurance or annuity cash value to pay for long-term care. With Long Term Care Linked Life Insurance & Annuities, the consumer maintains asset control, receives more long term care benefit for their dollar, and retains benefits whether or not they use their LTC benefit.
LTC Linked Life Insurance
A Long Term Care Linked Life Insurance policy acts just as a typical life insurance policy would, only with two added Long Term Care riders.
If the policyholder doesn’t have a Long Term Care event, the death benefit is paid out to the beneficiaries. However, if a Long Term Care event does happen, the first rider kicks in and starts paying a percentage of the death benefit every month to cover Long Term Care costs.
If the death benefit is depleted, the second rider is designed to cover the remaining costs of the Long Term Care.
LTC Linked Annuities
A Long Term Care Linked Annuity functions just as a fixed annuity would – the policyholder earns a fixed rate of return, earns tax-deferred growth, and can be converted to a source of income or passed to a beneficiary.
If an LTC benefit is needed, the company would use the initial deposit amount to fund the Long Term Care for one to two years. After that, the built-in multiplier of about 200% or 300% of the aggregated policy value would continue to pay the remaining years of the policy.