Hybrid Long-Term Care Insurance plans combine the best parts of Long-Term Care coverage with an effective "return of premium" via a tax-free death benefit. In 2020, hybrid policies surpassed sales of traditional policies by a large margin. While there are still many for whom a standalone LTC policy makes sense, for a growing number of people hybrid plans make sense.
One of the most attractive benefits of the Hybrid plan design is that, if done right, it will provide the consumer with strong guaranteed benefits. Beware of any page in an illustration for insurance that says "Non-Guaranteed Values" as they will paint a rosier picture of the future than what may happen. Hybrid policies from reputable companies including Nationwide, Minnesota Life, Pacific Life, and Lincoln Financial are availble in Florida.
The latter items is of utmost importance to many consumers. Over the years, the insurance companies have proven they priced LTC policies too low in years past, and consumers worry about rate stability in the future. For modern policy design, it is of less concern, but it is hard to argue with the hard and fast limits that mean a hybrid policy will be paid off and fully funded with no chance for a rate increase in the future.
While Floridians pay no state income tax, we do pay Federal tax, and investments are no exception. The alternative to a hybrid policy is to save money and self-fund LTC expenses with the growth on our money. The problem is taxes. If you invest $100,000 today in the S&P or some other passive investment and it earns a return of 8% on average, your gains will be shaved down by at least 20% when you withdraw them.
Meanwhile a hybrid policy is growing internally with tax-free growth. The fact of the matter is, Life Insurance companies have carved out some of the most lucrative benefits in the tax code, and you can benefit as well by purchasing one of these vehicles. As with all things Tax, be sure to consult a tax advisor.
Most hybrid Universal Life policies are built intentionally as Modified Endowment Contracts (MEC) which means using them other than for Life Insurance or Long Term Care benefits could create taxable events. For example, surrendering your policy and receiving a 100% cash-back return may actually create a taxable gain. Ask your advisor (or us!) for more information.
We saved the best feature of Hybrid Long Term Care insurance plans for last. In Florida, both Nationwide and Securian are approved to sell what are called "cash indemnity" benefit plans. Here's how they work: when it is time to make a Long Term Care claim, your doctor will certify the need for assistance. You'll call the insurer and initiate the claim. Once approved, they begin sending a check each month for your full benefit amount. They do not look at actual expenses or receipts. There are no requirements to document your expenses. This is a huge win that cannot be understated. If you are even remotely considering this type of policy, be sure it has cash benefits and not reimbursement. With the latter option, you or your heirs will be required to submit expense reports and receipts each month to the insurer. Cash benefits trump reimbursement every time.
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Florida has approved LTC Hybrid policies from virtually all of the major insurance companies, including Nationwide, Securian, Lincoln, OneAmerica, and Pacific Life.
"I was concerned I may not qualify due to some arthritis treated by medications. Once I spoke with LTC Tree, I felt like I had a plan of companies that would accept me. Two months later, my application was approved and after a short Q&A with my agent I sent in the premium and put coverage in force. All is well.
Don B., Ft Myers Florida