Long-Term Care Rider
As people are living longer all the time, providing long-term care has become a growing concern. But the basic problem with long-term care is that it’s incredibly expensive. Not only that, but there are a decreasing number of insurance companies that provide policies to cover long-term care. But you can add a long-term care rider to an annuity, so that you will have that contingency covered within your plan. The annuity will provide the income specified in the contract, but will also pay a long-term care benefit should that become necessary.
What the long-term care rider does is to adjust the income payout to help accommodate the cost of long-term care. For example, let’s say that the cost of long-term care will be $6,000 per month. If the annuity is scheduled to provide you with monthly income payments of $3,000, the payment will double to $6,000 per month in the event that you have been medically determined to require long-term care.
A long-term care rider usually provides a benefit that will be double the normal income payment from the annuity. For this reason, if you know that long-term care in your area runs about $6,000 per month, you might set your annuity with an income payment of $3,000 per month. That will give you the ability to be able to afford long-term care, should it become necessary.
The increased payments are typically available for up to 60 months, and generally apply to just one person – either you or your spouse. It also typically applies to a single long-term care situation. For example, if you are in long-term care for three years and then come out, the benefit will not carry over to a second stay. There are various hybrid annuities are available providing three times the long term care benefits of the invested amount.
Lifetime Income Benefit Rider
The lifetime income benefit rider (LIB) is commonly available with variable annuities. With the rider, the insurance company guarantees that you will receive regular income payments from the annuity, whether that is monthly, quarterly, or annually. The payments will continue for the rest of your life, even if the actual balance in the annuity is fully depleted.
The LIB can ensure that you never outlive your money, which is a common concern of retirees. For example, let’s say that you invest $200,000 in an annuity. The contract provides for a 5% annual income – but after 20 years the annuity is fully depleted. The insurance company will continue paying you the agreed-upon annual income benefit, in this case $10,000 (5% of $200,000) for the rest of your life. The LIB rider is an excellent idea for a person who begins taking income benefits at say, 60, and expects to live another 25 or 30 years.
Guaranteed Withdrawal Benefit
A guaranteed withdrawal benefit rider comes in at least two different flavors, a guaranteed lifetime withdrawal benefit (GLWB), and a guaranteed minimum withdrawal benefit (GMWB).
A guaranteed withdrawal benefit rider provides you with another way to get access to your money. The GLWB rider provides for immediate withdrawals from the invested balance, without having to annuitize the investment. The amount that you can withdraw is determined by a percentage of the total investment in the annuity.
A GMWB provides the annuity owner with the ability to withdraw a certain percentage of their original investments from the annuity until they have withdrawn the full amount of that initial investment. This protects the principal invested in the annuity by the annuity owner. For example, the annuity owner can withdraw 10% of the annuity balance each year, until the full amount of the initial investment has been fully recovered. In the meantime, the remaining balance in the plan continues to grow with the market.
Death Benefit Rider
The death benefit rider gives you the ability to provide death benefit for your heirs in the event of your death, converting the annuity to both a living benefit and a death benefit contract.
A death benefit rider guarantees that your heirs will receive at least the amount of the premium that you paid for the annuity. For example, if you pay $250,000 to establish the annuity, and as of the date of your death only half of the premium has been returned to you, your heirs will be entitled to death benefit of $125,000. Source: Good Financial Cents.
To plan for Medicare Benefits and or Annuity Investment that can provide additional income and or health benefits contact Sudhir Mathuria at 713-771-2900.
Understanding Benefits of Annuity riders offered by Insurance Companies
Long-Term Care Rider