Hi, Unit Linked investment products version of LTC (Unit 1, 6.5.9, Page 30): There are three choices of LTC claim triggers that afford different levels of fund protection: 1) Protecting entire fund 2) Protecting initial investment 3) Allowing to be exhausted The first one is easy to understand which is equivalent to a minimum defer period, after which the benefit begins and no further withdrawals made from the unit fund. The remainder of the core reading is confusing. Could anyone explain more simply how the rest of the options works? Thanks Jaz
I think what happens is that the fund is used first to pay for the cost of care up to a certain amount then the insurance kicks in. E.g. The 1st Option, where the entire fund is protected, the insurance pays for the cost of care from the outset. With the 2nd Option, where only the initial investment is protected, the investment fund is used to pay for the cost of care. Once the fund reduces to the value of the initial investment, the insurance kicks in and starts paying for the cost of care. The 3rd Option, where the entire fund is allowed to be exhausted, the fund pays for the cost of care until it is completely used up, then the insurance will kick in and starts to pay for the cost of care.
Yes, that's right. Any fund that is protected will get paid back to the policyholder. The more of the fund that is protected, the more the policyholder effectively has to pay for the insurance aspect of this policy. In terms of a unit-linked policy, this means that the risk charges (charges taken from the unit fund and to the non-unit fund to cover claim payments) must be bigger than if the fund was not protected.
