The need for long-term care policies is continuing to grow as the aging population increases. It means that the traditional long term care insurance is getting stretched beyond the limits.
Soon, it may not be available to many people. Also, underwriting the traditional LTC is getting more difficult as the day passes by.
Thus, most people are opting for hybrid long term life insurance policy.
What is Hybrid LTC Policy?
They are policies that bundle life insurance policies with long term care coverage.
They are asset-based products that can be categorized into two: accelerated death benefit riders and linked benefit products.
The linked benefits offer long term benefits while the accelerated death benefit riders may be used to meet long term expenses. Both of them are treated as LTC insurance policies.
Thus, the hybrid long term care policies connect insurance benefits and long term care benefits. Such hybrid linked benefits may be funded by a single upfront payment of say $100,000 or $50,000. Even though, the policyholder may decide to make installment payment for 10-15 years.
Generally, most of the hybrid policies will give you a chance to choose the long term care benefit. It could be monthly, periodically or inflation protection. The period one may need to wait could be fixed by the insurer but it is mostly 90 days.
Note that the hybrid LTC policies guarantee the holder to receive back their premium if they decide that they no longer need the long term care. They also have another advantage in that the premiums never increase.
The policy will:
- Meet the cost of care should you need one.
- Provide an estate tax-free cover should you decide that you don’t need the care.
- Give your money back if you change your mind.
But for people who have liquid assets and who may not need retirement income, the hybrid insurance policy may not be of value to them. Notice that the policies do not offer LTC partnership protection.
The Best Hybrid Long Term Care Life Insurance Policy
How it Works
It combines long term care insurance and life insurance features. It then forms a single hybrid policy. In some cases, it pairs long term care cover with an annuity. So, it may just need a single upfront premium payment to guarantee benefits that are associated with annuity or life policy base.
The long term care coverage borrows from traditional coverage. It offers leveraged pay-outs to meet LTC expenses. It thus puts aside some money that can be utilized in providing care for a lifetime or a specified period.
In some cases, the policies may come with accelerated death benefit rider. It is intended to provide LTC services. So if the insured needs long term care service, the amount to cover for these expenses must be recovered from the value of the death benefit. In such a case, the accelerated death proceeds will be treated as free riders.
Insurance policies may require that you have standalone LTC rider. In such a case, you will need to pay more money to purchase the cover. But, the policy is only available to people who already own a universal life, indexed universal life policies and whole life covers. It will not be available to the Term Life Policyholder.
Advantages of Hybrid Life Insurance with LTC
- The hybrid product guarantees that the premiums paid will be paid back as either death or LTC benefits.
- Medical underwriting is easy.
- The premiums paid are predetermined and fixed.
- When you repurpose the existing life insurance policy to finance LTC, it attracts preferential tax treatment.
Disadvantages
- It requires a single lump-sum payment of the premiums which may be too expensive for some people. Also, where installments are allowed, there are normally structured annual payments. It may be too costly to most people.
- The Payouts made will reduce the death benefits or the cash value of the policy. It means that the dependents may not get anything upon your death.
The Best Policies in the Market
LTC Tree
This policy is available to seniors headed into the retirement age. It was founded in 1995 and is currently a leading long term caregiver policy. It offers long term care plan that focuses on helping seniors access the best LTC annuities and hybrid plans.
The company has its headquarters in Atlanta Georgia but has clients in almost all states. It is a leading LTC insurance company that has made getting a hybrid covers easy. The company offers a diverse portfolio of products that gives clients a chance to choose a policy that can serve their needs.
Lincoln Money Guard
It is the oldest policy that offers the best values to younger people. It requires a single upfront payment and guarantees long term benefit to the holder. Also, it allows for flexible payments of premiums for a period of between three to ten years. It is ideal for single and young applicants
The State Life Asset Care
It is a top hybrid life insurance policy for married applicants. It is essentially tailored for married couples. The policy offers maximum LTC benefits and accepts funding from the IRA. It is a good hybrid life insurance that provides the holders with a long term care package which is offered by OneAmerica.
State Life Annuity Care II
It is a deferred annuity type of a policy that comes with immense benefits to the holder. The policy is a single premium plan that protects the holders from inflation. The inflation protection is normally at 5%. The cover allows the single premium to grow as accumulated value. It comes with a guaranteed minimum interest.
With this policy, the accumulated interest is given to the beneficiaries when you die. It happens if the interest was not consumed at the end of life care. The good thing about it is that the premium grows at an enhanced interest rate.
Generally, annuity care II requires that one must be in good health before applying for the policy. It is available to people aged between 40 and 80. It can be given either to spouses or a single person. The minimum amount of premium that you can pay is $10,000. So, you must select the premium amount that is capable of catering for your needs.
Asset Flex
It was introduced into the market in 2017 as a single premium policy that gives the policyholder a chance to accelerate their life insurance benefits for their care needs.
It means that if the policyholder exhausts what is entitled to them as life insurance benefits, the Asset Flex will provide an extension rider. Besides, the rider will allow the policyholder to receive benefits for another 48 months.
Notice that the premiums are paid in annual installment or could be paid in a lump sum. Typically, the installments are paid for a period of between 5 and 10 years. Unlike other types of hybrid policy, this one will require that you provide receipts to show that you qualified for care services.
Once this is done, you will be entitled to the benefits. Just like other LTC policies, Asset Flex has a waiting period of 90 days. Furthermore, the policy has a residual death benefit of ten percent of the covers face amount.
Minnesota Life SecureCare
It combines both long term and life care policy. The policy pays 100% cash indemnity. Besides, the policy does not require that you submit receipts to serve as evidence as it is in the case of reimbursement model.
But, if the policyholder still needs long term care, they will receive the LTC benefits tax-free. But if you are not interested in long term care, the benefits will be given to your named heirs without being taxed free. If they decide that they want to do away with the policy, they will be entitled to cash surrender value.
New members can subscribe to the policy by choosing an ideal long term care benefit. The benefit ranges between 2 and 7 years and comes with an LTC acceleration agreement of two to three years. It also provides for an extension of between two to four years and an option to protect the holder from inflation.
Why More Americans Are Considering This Plans?
Hybrid LTC products vary greatly in terms of price, benefits, and flexibility. In the United States alone, over 260,000 people bought Hybrid insurance with LTC products in 2018.
So, when you decide to go shopping for the policy, you should consider the following:
Requirements for Eligibility
Study the requirements you may need to meet to qualify for the benefits. In most cases, a practitioner will need to certify that the insured has a cognitive impairment. The impairment should make it difficult for them to perform or engage in at least two of out of the six activities for Daily Living (ADLs).
This should have continued to take place for not less than 90 days. Also, it is a must that you complete the waiting period before the benefits start flowing. These requirements are also applicable to traditional LTC policies.
Choose Either Monthly Benefits or Accelerated Percentage
When applying for the policy, you have the option to choose between the accelerated percentage and monthly benefits. You also need to select the pay-out option that will determine the duration of payment.
Besides, you may opt to get the monthly benefit (maximum) as long as your eligibility to LTC continues. If you choose to receive a fraction of full monthly payout, you will receive the payments for a longer period.
Cash Indemnity Vs Reimbursement
Some policies will request that you choose between cash indemnity and reimbursement. But the policyholder must provide evidence of the expenses incurred before accessing the monthly benefits.
But when the holders opt for the cash indemnity benefits, they will receive the full monthly LTC. They will receive the benefits without the need to submit evidence of expenditure such as receipts.
Other Considerations
The cash plan indemnity: It is considered a better plan because it is flexible and allows the cash to be used to pay informal caregivers. The money can also be used to pay for expenses that cannot be catered for under reimbursement benefit schemes.
Note that the benefits received under this are tax-free if the amount is below 4 131,400 per year or three hundred and sixty dollars per day.
Premium Refund: Most of hybrid policy LTC will refund about 80-100 % of the premiums paid. It means that if the owner of the policy decides to surrender the policy, they may be entitled to most of the money they have paid as premiums.
Inflation Protection: It is intended to caution the beneficiary from inflation. The rate could be 3 -5percent and could be calculated as either compound or simple interest.
Residual death benefits –it is the guaranteed minimum death benefit that could be paid to the policyholder as their long term care expenses. The payment varies greatly depending on the provider in question.
Options of Financing LTC Insurance Policy
When you decide to buy LTC insurance, having a source of income that can allow you to pay premiums is critical. But your ability to pay the premiums could be curtailed by the death of a spouse or increases in premiums. Thus, good planning is required.
Also, you may finance LTC in any way depending on the financial situation you find yourself in. If you can use your resources to finance it, the better it is. But other people use a combination of resources. It allows them to qualify for programs such as Medi-cal.
Here are Ways to Finance LTC
Your Financial Planner
If you will be paying for the program using your cash, consulting your accountant is critical. They will help you to figure out how much you can afford to pay for the policy. Also, consider reviewing available consumer information from attorneys and local agencies.
Public Programs
There are a few programs that pay for LTC services. But you must meet their requirements. This way you will be on the way to receiving their funding towards your LTC insurance policy.
Sale of Life Insurance Policies
You may sell your life insurance annuities and policies and use the proceeds to pay for LTC. In some cases, the life insurance policy may use some portion of your death benefits to pay for the LTC. Any amount used for this purpose goes towards reducing the death benefits to be paid to the beneficiaries when you breathe your last.
Home Equity Conversion
It is also referred to as a reverse mortgage. This method creates a stream of income that allows you to continue living in your home but use its equity to pay for your care. The scheme enables you to receive periodic payments depending on the equity of your home.
Life Settlement or Viatical
It allows you to sell a life insurance policy and use the proceeds to finance the LTC. But you need to meet eligibility criteria.
Frequently Asked Questions (FAQs)
Whether to buy hybrid LTC insurance cover or not is dependent upon many factors. Here are frequently asked questions about Hybrid LTC. They are meant to help you determine whether to buy the LTC insurance policy.
Q1. Is it beneficial to buy Hybrid LTC policy?
Owning a long term care policy is critical especially in the old age. Long term care has made the affluent and the middle-income earners in the USA become poor overnight.
Yet a half of Americans aged above 60 have had to do with the costly long term care. When it happens to you, it means that you must be ready to spend about $100,000 per year on the care. If you had savings, this type of care would surely wipe it out.
Q2. Who sells Long Term Care Policies?
Insurance agents, associations, and companies sell the policies. Also, you can buy the policies from some private employer and sponsors of LTC Insurance. The policy can also be bought from public employee retirement systems.
Q3. What LTC insurance policy is best for me?
The best LTC insurance policy depends on the special circumstances you are in. Besides, the economic circumstances you are in may determine the best LTC for you. For instance, women are likely to live longer than men, so they need LTC more than their men counterparts.
Q4. How do you choose the best LTC insurance company?
Some LTC companies are large and have been around for many years, while others are new and are trying to gain an inroad into the market. The best way to choose the best LTC provider is by consulting rating services companies.
They will provide you with information that can enable you to evaluate the ability of LTC insurance companies. Also, if you are in California, contact the California Department of Insurance. The department publishes information on companies that offer LTC. It also publishes information on how much they charge.
Q5. Will the LTC policy still cover me if I move to another state?
YES, there are strong LTC standards and consumers are highly protected throughout the USA. The services offered in every state may differ depending on the facilities available. So you must contact your provider when you move so that you discuss the services covered.
Conclusion
LTC hybrid is a deferred annuity. It requires that you make one lump-sum payment or installment payments for long term care. It guarantees to provide long term care to the policyholder.
But, if the holder will not need the long term care, the annuity earns interest. Besides, it will operate just like other fixed annuities. Also, the holder who needs long term care will be entitled to some calculated benefits every month.
