Long Term Care products Flashcards
How does an immediate needs policy work? (7)
Taken out when needed
Lump sum premium
Impaired life annuity
Based on health and life expectancy/mortality risk
Guaranteed income for life
Used in home or care home
Income tax free if paid to care provider
Or taxed as purchased life annuity if paid to settlor
What are the advantages of immediate needs annuity?
Guaranteed income for life
Lump sum can be paid when required
Life could be longer than provider estimates and could get more bang for buck
Tax free if to care provider
What is the difference between a purchased life annuity and impaired life annuity?
Purchased life annuity are taxed/impaired life annuities are not if paid to care provider
What are the five LTC options?
Immediate needs
Pre-funded
Equity release and lifetime mortgages
WOL-sum assured pays out on care
Fund with own investments
What is the benefit of deferred care? (3)
Cheaper than immediate care
Deferred for months/years
Can self fund for x year
What is a care cash plan? (5)
Plan that covers future possibility of needing care
Ls/income paid out for set period
Pays out on set diagnosis or 3/5 adl
No limits
Monthly premium
What are the downsides to equity release (4)
Fees to pay
Could affect your benefits
Your debt will increase
Money could run out
What is a lifetime mortgage? (5)
For use for care at HOME only, ceases when move into care
Money can be used for anythin
Releases equity
Paid back with interest on death/sale
2 interest options. Roll up or interest only
What Are the two types of equity release? (2)
-Lifetime mortgage-take loan out on home, repaid with interest when dead
Or sold (roll up or interest only paid back as go)
-Home reversion plan (sells part of home and gets LS. Unlikely to get market price
What is a home reversion plan? (9)
Keeps lifetime tenancy
Sells part or all @crap price=gets lump sum eg1/3 of market price
Can still gain from future appreciation on part not sold
Can release in tranche
Cannot make change
Improvements expected
>65’s
Older you are the more money you’ll be able to release
Retain share for iht purposes
9 features of an impaired life annuity
Lump sum Premium amount based on health
Tax free if paid to care home/taxable if not
Qualify for ILA if cannot complete 1 ADL
Based on mortality risk
Guarantees can be built in if die soon
Can be level or Index linked
More expensive than deferred
Poorer health=bigger annuity
Quids in if live longer than provider estimates
How does a pre-funded policy work (5)
Pays out for care in home or at home
Pre-funded
Pays out on ADL’s x 2
Setup to pay out until end of care or a max time period eg 3 years
Traditional or investment linked (money for care and beneficiaries)
How does an investment linked pre funded LTC policy work? (5)
Covers care and gives money to beneficiaires
Growth through investment link
Single lump sump put into bond
Premiums taken from bond each month
If no claim made, bond is available to estate
Disadvantages of inv linked pre funded ltc policy (4)
Poor inv growth may lead to reduction in cover or need for additional premium
The later you take it out the bigger the premiums need to be
Bond may be eroded by withdrawals so not much goes to beneficiaries on date of death
Premium increases to cover by insurer
Disadvantages of lifetime mortgage? (5£
-Could affect means testing (due to income received)
-Expectations on beneficiaries to sort out on death
-only for use in home, ceases on care home
-early repayment charges, costs etc
-be in a position of negative equity if interest rates rise and property prices fall
