Long Term Care products Flashcards

1
Q

How does an immediate needs policy work? (7)

A

Taken out when needed
Lump sum premium
Impaired life annuity
Based on health and life expectancy/mortality risk
Guaranteed income for life
Used in home or care home
Income tax free if paid to care provider
Or taxed as purchased life annuity if paid to settlor

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2
Q

What are the advantages of immediate needs annuity?

A

Guaranteed income for life
Lump sum can be paid when required
Life could be longer than provider estimates and could get more bang for buck
Tax free if to care provider

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3
Q

What is the difference between a purchased life annuity and impaired life annuity?

A

Purchased life annuity are taxed/impaired life annuities are not if paid to care provider

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4
Q

What are the five LTC options?

A

Immediate needs
Pre-funded
Equity release and lifetime mortgages
WOL-sum assured pays out on care
Fund with own investments

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5
Q

What is the benefit of deferred care? (3)

A

Cheaper than immediate care
Deferred for months/years
Can self fund for x year

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6
Q

What is a care cash plan? (5)

A

Plan that covers future possibility of needing care
Ls/income paid out for set period
Pays out on set diagnosis or 3/5 adl
No limits
Monthly premium

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7
Q

What are the downsides to equity release (4)

A

Fees to pay
Could affect your benefits
Your debt will increase
Money could run out

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8
Q

What is a lifetime mortgage? (5)

A

For use for care at HOME only, ceases when move into care
Money can be used for anythin
Releases equity
Paid back with interest on death/sale
2 interest options. Roll up or interest only

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9
Q

What Are the two types of equity release? (2)

A

-Lifetime mortgage-take loan out on home, repaid with interest when dead
Or sold (roll up or interest only paid back as go)
-Home reversion plan (sells part of home and gets LS. Unlikely to get market price

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10
Q

What is a home reversion plan? (9)

A

Keeps lifetime tenancy
Sells part or all @crap price=gets lump sum eg1/3 of market price
Can still gain from future appreciation on part not sold
Can release in tranche
Cannot make change
Improvements expected
>65’s
Older you are the more money you’ll be able to release
Retain share for iht purposes

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11
Q

9 features of an impaired life annuity

A

Lump sum Premium amount based on health
Tax free if paid to care home/taxable if not
Qualify for ILA if cannot complete 1 ADL
Based on mortality risk
Guarantees can be built in if die soon
Can be level or Index linked
More expensive than deferred
Poorer health=bigger annuity
Quids in if live longer than provider estimates

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12
Q

How does a pre-funded policy work (5)

A

Pays out for care in home or at home
Pre-funded
Pays out on ADL’s x 2
Setup to pay out until end of care or a max time period eg 3 years
Traditional or investment linked (money for care and beneficiaries)

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13
Q

How does an investment linked pre funded LTC policy work? (5)

A

Covers care and gives money to beneficiaires

Growth through investment link

Single lump sump put into bond

Premiums taken from bond each month

If no claim made, bond is available to estate

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14
Q

Disadvantages of inv linked pre funded ltc policy (4)

A

Poor inv growth may lead to reduction in cover or need for additional premium

The later you take it out the bigger the premiums need to be

Bond may be eroded by withdrawals so not much goes to beneficiaries on date of death

Premium increases to cover by insurer

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15
Q

Disadvantages of lifetime mortgage? (5£

A

-Could affect means testing (due to income received)
-Expectations on beneficiaries to sort out on death
-only for use in home, ceases on care home
-early repayment charges, costs etc
-be in a position of negative equity if interest rates rise and property prices fall

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16
Q

Disadvatages of a home reversion
Plan (7)

A

Only for >65s
Crap price 1/3
Price dictated by age/length of tie in for company
Renovate expectation
If die soon after they will lose out
Costs/charges
Difficult to reverse

17
Q

Considerations of using savings and investments and investments for LTC needs? (3)

A

Can be built up through life
Need income generating investments if need income (need to ensure tax efficiency)
May need to dispose of equity for immediate needs annuity (cgt aware)

18
Q

5 methods for funding Ltc

A

Savings/investments
Pension
Selling capital assets
Selling/part selling home
Accelerated death benefits on policies(eg ci on life policy

19
Q

2 benefits of using pension as LTC

A

Pensions can be reserved
Access income/capital flexibly through UFPLS/FAD-triggering mpaa

20
Q

Benefits of using the home for ltc (2)

A

Can sell to pay for care
Can let-better returns than FIS/deposit accounts (but management costs etc)