If you are researching hybrid long term care policies, then you may want to consider the Lincoln MoneyGuard life insurance product. In this post, we will discuss how this policy works and provide examples of the benefits it will provide now and in the future.
Asset based planning for long term care is very popular and for good reason. These policies allow consumers to leverage their invested dollars several times over to create a tax-qualified long term care policy. All of this can be done with a single premium – or a fixed number of premiums.
Hybrid LTC plans are advantageous as they eliminate indefinite yearly premiums, future premium increases and paying tens of thousands of dollars for something the insured may never benefit from. Life insurance and annuity plans providing tax-qualified LTC benefits provide growth, access to the invested premium, and a residual death benefit for the owner’s beneficiaries.
All hybrid LTC plans are built off of either an annuity or a life insurance policy. MoneyGuard is built off of a guaranteed universal life insurance chassis. Your total benefit pool for long term care will be determined by factors including: your age, gender, selected benefit period, inflation protection and deposit amount.
Policies can be funded with a one-time single premium or through installment payments of 2-10 years. All things being equal, your life insurance policy (and LTC benefit pool) will be larger if the funds are deposited over shorter amount of time or through a single premium. You can choose between 2-7 year benefit periods, but the policy will last longer than your chosen term if you are not using the full allotted long term care benefit amount each month.
Both 3% and 5% compounding inflation options are available for purchase so the policy benefits can keep up with the rising costs of health care. When inflation protection is added, policies can create a sizable future benefit pool for the insured.
MoneyGuard offers an 80% and 100% return of premium feature should the insured want/need their premiums returned. One of these two options is chosen at purchase and will affect the overall benefit pool.
Polices are available for purchase between ages 40 and 79. Applicants over age 79 will not be accepted. Spousal discounts are available – even when the other spouse does not apply or is not accepted due to poor health. MoneyGuard can only be purchased on one life however – so spouses will each need to purchase their own plan. Plans cannot be linked.
Let’t take a look at a hypothetical 60 year old couple in Ohio who each invests $100,000 in a 6 year MoneyGuard policy with a 3% compounding inflation rider and 80% return of premium rider.
|Lincoln MoneyGuard||Male Age 60||Female Age 60|
|One-Time Single Premium||$100,000||$100,000|
|Minimum Plan Length||6 years||6 years|
|Inflation Option||3% Compounding||3% Compounding|
|Initial Monthly Benefits||$5,808||$5,264|
|Initial Annual Benefits||$69,700||$63,170|
|Initial Total Benefits||$450,848||$408,606|
|Same Couple 10 Years Later||Male Age 70||Female Age 70|
|Monthly Benefits After 10 Years||$7,579||$6,868|
|Annual Benefits After 10 Years||$90,943||$84,422|
|Total Benefits After 10 Years||$588,255||$533,138|
|Same Couple 20 Years Later||Male Age 80||Female Age 80|
|Monthly Benefits After 20 Years||$10,185||$9,231|
|Annual Benefits After 20 Years||$122,219||$110,768|
|Total Benefits After 20 Years||$790,565||$716,493|
|Same Couple 25 Years Later||Male Age 85||Female Age 85|
|Monthly Benefits After 25 Years||$11,807||$10,701|
|Annual Benefits After 25 Years||$141,686||$128,411|
|Total Benefits After 25 Years||$916,481||$830,612|
As you can see, the 3% compounding inflation significantly increases the benefit amounts provided by this policy in the later years. After 20 years, a $100,000 premium has purchased well over $700,000 in long term care benefits for each spouse. This is 7X worth of leverage and estate protection. A 5% inflation rider would illustrate even higher numbers.
And if the policy benefits are never used, their is a residual tax-free life insurance benefit to the named beneficiaries. While this number fluctuates, it will never fall below a certain amount. In the example above, the life insurance minimum death benefit for the husband is $139,400 and for the wife is $126,339.
And what if the policy has been exhausted completely through long term care withdraws? The Lincoln MoneyGuard is unique in that it still provides a small life insurance benefit. In the example above, it is $6,970 for the husband and $6,316 for the wife.
At purchase, Lincoln National Life allows the owner to select one of two options: 80% return or premium or 100% return of premium. The LTC benefit pool will be larger when the 80% feature is selected. The entire 80% of funds are returnable once they have been deposited.
The 100% return of premium feature vests over 5 years. After year one, 80% of your premium is available penalty-free and this number increases by 4% each year until 5 years have passed. After 5 years, all invested funds can be accessed penalty-free. Loan features and other options are included that allow the owner to withdraw (and return) smaller amounts if needed. Like most life insurance policies, you have access to your deposited funds.
Any time you are investing large sums of money, you want to know that the company backing your policy is going to be around when you need them most… and that they will make good on their promises. Lincoln Financial has been offering insurance and investments since 1905 – well over 100 years.
They have an A+ rating with AM Best which is the second highest rating available. They offer life insurance, annuities, group benefits and several other lines of insurance which helps them to diversify their risk. They are a strong and reliable company.
We are an independent insurance agency specializing in asset based hybrid long term care insurance. We work directly with the Lincoln Financial MoneyGuard product and several others. We can help you find the policy that best suits your LTC planning needs.