They should be – more consumers are reading about them, as an alternative to standalone Long-Term Care Insurance. They can be a solution to clients who express concerns such as, “I don’t want to pay for something that I may never use” or “I’m concerned about future premium increases on standalone LTCI.
“Linked Benefits” has become a catch-all phrase to encompass any product that offers both a life insurance (or annuity) base, with a Long Term Care rider. However, there are actually two different types of products that combine life insurance (or annuities) and an LTC benefit.
- The first type – and most accurately a true “linked benefit” plan, is commonly referred to as “asset based.” These policies are most often funded with a single premium deposit (or, with some carriers, a “multi-pay” option may allow for premiums over, for example, 3,5,7 or 10 years). The key advantage of these plans is the LEVERAGE they create, by using that single deposit to create a benefit pool for Long Term Care of, for example, 4-5 times the single premium amount. Plans may pay their benefits on either a reimbursement or indemnity/cash basis, and a Return of Premium benefit (full or partial), may be available. The life insurance version of these plans also offers a life insurance death benefit which is some factor larger than the premium deposit. However, these plans are not built to maximize the death benefit; they are designed to maximize the LTC benefit pool.
- The second type of plan is an ongoing premium-paying plan. These are typically Life Insurance based, and the LTC (or sometimes referred to as “Chronic Illness”) benefit that is available is based on the death benefit. The LTC/Chronic Illness rider accelerates the death benefit (e.g. allows the insured/owner to access the death benefit “early”) – in either a reimbursement or indemnity/cash based fashion – when the benefit trigger is met. These plans are often on a traditional Universal Life (often GUL) chassis, but Whole Life or even Term based options may be available. The LTC/Chronic benefits pare paid based on one of two models; either the policy charges a separate premium for the LTC/Chronic rider and the total death benefit of the policy may be accelerated, or the carrier may charge NO upfront premium for the rider, but the total amount of death benefit available for acceleration is “discounted” at time of claim based on the insured’s age and condition.
If you client or prospect shares any of the sentiments below as part of your consultation, a “linked benefit” (or life policy with an acceleration rider) may be right for them:
- I do not wish to pay for something I may never use
- I really don’t think I’ll ever need care
- I am worried about rising LTC premiums late in life
- I’ve thought about LTC, but have chosen to self-insure
- I’ve got a CD or older Life policy with cash value built up
There are varying policy specifics, design features available today, and the market is constantly changing. To learn more about these products, and how you can help your clients sort through the options, reach out to us at 800.695.8224 and:
- Life insurance based solutions – Option 3
- Annuity based solutions – Ext. 109.