Unit-linked LTCI

[Jian_901]

Hi all,

I would like to start a thread on the benefit under an Unit-linked LTCI product.

I understand that before the commencement of a claim, the unit-fund will have the following charges deducted on a regular basis:

• Buy/sell spread (e.g. 5%)
• Risk charges (e.g. for funding the insurance risk/cost of care)

These deductions are subsequently added to the non-unit fund.

I would like to clarify as to whether the non-unit fund has a guarantee that the risk charges deducted will cover the life-time cost of care, or is there a point of fund exhaustion i.e. the policyholder will be left without cover after the non-unit fund is exhausted?

If either approach is workable, which one is the most common in practice?

Thanks for your help,
Jian

 

[Mark Willder]

Hi all,

I would like to start a thread on the benefit under an Unit-linked LTCI product.

I understand that before the commencement of a claim, the unit-fund will have the following charges deducted on a regular basis:

• Buy/sell spread (e.g. 5%)
• Risk charges (e.g. for funding the insurance risk/cost of care)

These deductions are subsequently added to the non-unit fund.

I would like to clarify as to whether the non-unit fund has a guarantee that the risk charges deducted will cover the life-time cost of care, or is there a point of fund exhaustion i.e. the policyholder will be left without cover after the non-unit fund is exhausted?

If either approach is workable, which one is the most common in practice?

Thanks for your help,
Jian

Hi Jian

Either approach that you describe is possible in theory. However, no such contract is currently on sale in the UK (sales of pre-funded LTCI had been very low in the UK, so the insurers have now all pulled out of the market).

If any students are aware of pre-funded LTCI contracts currently on sale then it would be interesting to hear how they work.

Best wishes

Mark