Omega Financial Associates

What it is:

Cash value life insurance with long-term care or convalescent care riders. The riders can pre-pay the death benefit (and more) to reimburse expenses incurred for covered care services.

Advantages:

• Pays a death benefit if long-term care is not needed.
• May be funded with a single premium or with recurring premiums.
• Have cash values that may be accessed. (Provided sufficient funds remain to keep the policy in force.)
• Leverages the benefit value of “rainy day” money that goes into policy.
• May be suitable for tax-free exchanges from conventional life policies.
  (Beware of surrender charges.)

Disadvantages:

• Limited LTC plan design flexibility.
• Single premiums may be unaffordable to many clients.
• Modest cash value growth potential when compared with other accumulation products.
• Death benefit is reduced by amounts paid for LTC.

Look for:

• Lifetime money back guarantee (single premium policies).
• Lifetime minimum benefit guarantee, or no lapse guarantee.
• Tax-qualified LTC riders that pay income tax-free LTC benefits.
• Extension rider that continues LTC benefits after life insurance death benefit is exhausted.
• If purchased with a single premium, no additional premiums required to fund LTC riders.
• Lifetime inflation protection option, with all additional cost built into the single premium.

Beware of:

• Non tax-qualified LTC riders that may produce taxable LTC benefits.
• Policies that offer no extension riders. (If they only pre-pay the death benefit, beneficiaries still lose all benefits distributed for care services.)
• Market risks when variable life insurance is involved. (LTC benefits may vary according to future market performance.)
• Potential for future bills when the policy is advertised as a “single premium” product.