8: Long-Term Care Insurance Pt. 3 Flashcards
(30 cards)
A client has a whole of life policy with critical illness. Can this help with care costs?
Yes — accelerated death or critical illness benefits can be accessed if qualifying conditions are met, releasing early funds.
What happens if an unregistered Enduring Power of Attorney (EPA) exists after October 2007?
It can still be registered — EPAs created before this date are still valid but must be registered if the donor loses capacity.
What is one advantage of equity release over selling a property?
The person can stay in their home — this preserves emotional stability and avoids the disruption of selling and moving.
Under what condition is benefit from an Immediate Needs Annuity tax-free?
If paid directly to a CQC-registered care provider — otherwise, it’s taxed like a standard purchased life annuity.
What financial consideration makes home reversion plans less attractive?
You usually receive only a third of property value — this low payout can limit available care funds despite giving up ownership.
What is a key financial risk of early repayment in a lifetime mortgage?
Early repayment charges — these can be extremely high, especially if gilt yields move unfavourably.
A 60-year-old with a mortgage-free property wants a cash lump sum to fund future care. What equity release option is suitable?
Lifetime mortgage — available from age 55+, provides a lump sum while keeping ownership.
Why might CGT not apply when selling the main home to fund care?
Because of Principal Private Residence relief — this usually exempts the main home from capital gains tax.
A client took out a traditional LTC insurance policy 10 years ago and now wants to cancel. What is likely?
No return of premiums — most legacy policies don’t refund premiums if cancelled.
What is the possible early repayment charge range for a lifetime mortgage with variable fees?
0% to 25% — based on movements in gilt yields.
What is the typical maximum payout period for some traditional pre-funded LTC policies?
3 years — after which the policy may stop paying.
What is the age requirement to make a Lasting Power of Attorney?
18 or over — and the person must have mental capacity.
What is the purpose of a deferred care policy, and how does its cost compare to an immediate needs annuity?
Deferred care is insurance that helps if you run out of money for care later. It is usually cheaper than an immediate needs annuity.
What type of policy combines a single premium investment bond with a regular LTC premium?
Pre-funded investment-linked policy.
From where is the LTC premium paid in a pre-funded investment-linked policy?
From the investment bond.
What happens to the value of the bond in a pre-funded investment-linked LTC policy after a claim?
Any remaining value is returned to the individual’s estate.
What does a care cash plan pay out?
Income or a cash lump sum for a set period.
What can cause poor cover in pre-funded investment-linked LTC policies?
Poor investment performance, cashing out, or a bad claims experience with the insurer.
Name four illnesses that elderly care cover in a care cash plan may pay out for.
Alzheimer’s, motor neurone disease, Parkinson’s, pre-senile dementia.
Elderly care cover can be included on what type of LTC plan?
Care cash plan
What are the two interest options available under a lifetime mortgage?
Interest only and roll-up mortgages.
In an interest-only lifetime mortgage, when is the original loan repaid?
When the customer dies or enters permanent residential care.
What payment does a roll-up mortgage provide?
A cash lump sum or a series of payments.
What are the 3 steps in deciding a client’s capital and income needs for long-term care?
- Assess the objectives in relation to their resources, circumstances, and risk profile.
- Assess the costs involved.
- Assess the amount of capital required to meet the needs.
