Long Term Care Insurance With a New Twist
An introduction to policies that combine Life insurance with a Long Term Care insurance benefit.
Why pay for something I may never use?
Most people know they should consider Long Term Care Insurance (LTCi), but they’re reluctant to buy it. Why? They just don’t know if they’ll ever use it and don’t want to feel like they’re throwing money away. You probably have insurance on your car, home, and health, and write the check each time hoping you’ll never need it. It’s good to know it’s there if you do, though, isn’t it? And you no doubt are planning to live a healthy life and never need the kind of protection long term care insurance provides.
But the fact is: 70% of people over the age of 65 will require long term care1
So, odds are you will need this protection. You may have even seen a friend or family member devastated by the cost of a serious illness. While you probably don’t want to spend down your nest egg on a nursing home or go on Medicaid, you want to ensure you can get quality care if you need it and guarantee a fulfilling legacy for your loved ones. That’s what makes Hybrids (also known as linked benefits or asset based care) so appealing.
What is Hybrid Life/ LTC insurance?
This hybrid policy combines a Permanent life insurance policy with a Long Term Care insurance benefit. Your dollars can do double duty: if you need money to cover the costs of long term care, you have it. If you never need long term care, the life insurance death benefit will be paid to your beneficiary(ies). If you use just a portion of the LTCi benefits, the death benefit remains at a correspondingly reduced amount. Added bonuses: the LTCi benefits are paid to you tax-free, and hybrids are less expensive than purchasing both a Life and an LTCi policy.
It provides you with a guaranteed pool of benefits.
When you purchase a Hybrid, you’re taking an asset (or part of one) and leveraging it. Perhaps you have a $100,000 CD earmarked to cover your long term care costs. If you used that money to purchase a Hybrid Life/ LTCi policy, you could automatically double, triple, or even quadruple the pool of the money available for your LTC benefits, or your life insurance death benefits could increase up to three times that initial premium. Some policies emphasize the death benefit and some emphasize the long term care benefit. All have guaranteed premiums. Jeff D. Hackmeier, LUTCF, CSA can help you choose the features that matter most to you.
Customizing your Hybrid.
While Hybrid Life/ Long Term Care insurance policies don’t have all the bells and whistles of traditional stand-alone LTCi policies, there are many policy options for you to consider*:
- Funding Options: You can choose how and when to pay your premium: single premium, level-pay, shortened pay (payments for a defined amount of time), 1035 exchange of cash values from an existing Permanent life policy.
- Elimination Period: This is sometimes called the deductible or waiting period. Some Hybrids offer 90- and 365- day elimination periods. Remember: the longer the elimination period, the lower the premiums.
- Benefit Amount: Monthly benefits are available as a percentage of the death benefit or a specified dollar amount. Keep in mind: lower benefit amounts mean lower premiums.
- Benefit Period: This is the number of years you can receive benefits. Benefit period choices range from 50 months to lifetime. Some are lump sum.
- Inflation Option: This offers protection from rising long term care costs by keeping pace with inflation. Some Hybrid policies offer a 5% compound.
Hybrid Life/ LTCi is ideal if you:
- Like the idea of LTCi, but don’t want to pay for something you may never use.
- Planned to self-insure and have other assets set aside for LTC (such as CDs, savings, bonds)
- Have an existing life insurance policy with cash value
- Don’t qualify for traditional LTCi (you may still qualify for a Hybrid)
- Are looking for tax-free benefits
For more information
Contact Jeff D. Hackmeier & Associates
1U.S. Department of Health & Human Services
*These options vary among companies and policies.
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