Today I am going to focus on life insurance with accelerated benefits for long term care needs, and products that have accelerated benefits. In short, accelerated benefits would mean that the death benefit would be paid out to you while living if you can’t perform 2 of the 6 activities of daily living. Let’s look at a real life scenario. You may have some dollars set aside that won’t be needed for retirement income. You purchase a life insurance policy with the benefits described. Let’s assume that a problem develops, you can’t perform 2 of the 6 activities of daily living. This could be a single premium or a periodic payment plan. Let’s say that you opted for a single premium of $100,000. That would get a 65 year old female anywhere between $180,000 and $300,000 of death benefit (the more underwriting… the greater the death benefit). So, let’s assume a $200,000 death benefit. Health problem occurs, you can’t perform 2 of the 6 activities of daily living and the $200,000 is paid to you to cover costs. Most payments are made over 3 to 6 years. And, because it is an accelerated death benefit, proceeds should be tax free.
Okay, what happens if I don’t need those accelerated benefits and I pass away? The, proceeds are paid tax free to a named beneficiary. This is legacy planning. What happens if you have an emergency and need the money? These products accumulate cash value and you have access to them. Some, after a period of time, also feature a “return of premium.” So, with these dollars, you will determine what happens with this portion of your estate. Bottom line, your financial professional can provide you with information on this type of product. What do you have to lose? This is a tax friendly approach to an important part of your retirement plan. Let me know if you would like more information about this type of legacy planning.