Linked Benefit Explained in 1-2-3
- Tamara Wallen
- 01/09/2019 07:00 AM
Most advisors aren’t experts in long-term care. So it’s understandable if you struggle to explain the concept of linked benefit, let alone convince someone to purchase it. Especially when you’d rather be doing something else. Anything else!
But because long-term care can be so challenging, that’s exactly the reason it’s crucial to take the time to explain all options available. That may mean taking the time to educate yourself first.
Since linked benefit plans combine both life insurance or annuities with long-term care, you might think they’re complicated. However, that is not the case.
Essentially, a linked-benefit policy has three components:
- LIVE - An income-tax-free benefit pays for long-term care expenses, which could include home care, adult daycare, assisted living and/or skilled nursing care. The policy is issued with a monthly benefit that is paid for a specific number of years, based on the policy design and riders purchased. Some policies offer benefits that can last for up to seven years.
- DIE - The life insurance pays an income-tax-free death benefit. The death benefit is reduced by any loans, withdrawals and/or benefits the insurer has already paid. Many policies also offer a residual death benefit, usually 10-20 percent of the initial amount of insurance, if the entire benefit has been consumed by long-term care expenses.
- QUIT – The policy’s cash value earns a set rate of return. Once all the planned premiums have been paid, the policy can be surrendered for the actual cash value, which is often 80-100 percent of the premium paid. Policy surrenders are subject to any vesting schedule and adjusted for any claims, loans or cash withdrawals.
It's an easy conversation to have if you’re a long-term care marketer like me, but not so much if this is not your everyday focus. Avoiding the conversation doesn’t have to be your default plan. If you have questions, JUST ASK! Use my calendar link to schedule a time that’s convenient for us to talk.