Death Benefits While You’re Living – Solving long term care problems.
Many professionals work hard during their working years and build up a retirement income plan for their retirement years. There can be nothing more devastating to a retirement income plan than unexpected costs from chronic illness.
Over 50% of men and over 75% of women older than 65 will need some type of chronic illness care at some point during their life. For years, long-term care insurance (LTCI) has been thought of as the sole solution for this problem by providing financial benefits to pay for long term care services such as nursing home and assisted living center costs. Although millions of Americans, and their families, can testify to how LTCI has provided for them in their times of need, many are finding out about the shortcomings of LTCI the hard way.
For example, in addition to becoming increasingly expensive and harder to come by, LTCI is limited in the type of services it covers and works on an indemnity basis. So, if part of the long term care includes substance abuse treatment, it won’t be covered under LTCI. Also, if there is no money to front the cost of the long term care, then there is no long term care.
There has to be an alternative. The Hartford’s LifeAccess Accelerated Benefit Rider in conjunction with some of their permanent life insurance products can help a maturing population meet the gaps left by LTCI. The Rider can add important protection to preserve a retirement income plan.
What does it mean to be chronically ill?
The insured is chronically ill if he or she cannot perform at least two of the six Activities of Daily Living (eating, bathing, dressing, toileting/personal hygiene, transferring – chair, bed or wheelchair & maintaining continence – control of bowel or bladder functions) without substantial assistance for at least 90 days, or if the insured requires substantial supervision to protect him or her from threats to health and safety due to severe cognitive impairment. One also has to be certified chronically ill by a licensed health care practitioner, under a plan of care, and in need of services that will likely be needed for the rest of their life. Annual recertification is required.
How Does The LifeAccess Rider Work?
The LifeAccess Accelerated Benefit Rider allows the insured to draw from the death benefit of a permanent life product, up to 100%, in order to provide income if the insured becomes chronically ill. The insured can then use the benefit for any expense, medical or non-medical. The Rider can only be added to the policy at issuance.
Benefits paid out will reduce the death benefit dollar for dollar and, as mentioned before, there are no restrictions on the use of the benefits. Benefits are available as a monthly, annual lump sum or as a one-time lump sum payment. Benefits paid monthly cannot exceed 2% of the death benefit or the IRS Per Diem Limit, currently $300 daily. Benefits may or may not be taxed depending on the benefit recipient’s particular situation. It is advised that a qualified tax advisor be consulted prior to purchasing the rider and electing to receive benefits. There is also no waiting period after an approved LifeAccess claim.
The LifeAccess Accelerated Benefit Rider is not long-term care insurance nor is it intended to be used as a substitute for long-term care insurance. The Rider does allow an insured to draw on the death benefit while still living and protect retirement assets.
A knowledgeable life insurance and retirement planning agent can be a valuable resource for professionals looking for the proper protection. Feel free to contact us with any questions.
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