Hybrid Long Term Care Insurance Policies

Background

Planning for Long Term Care has evolved over the years.  What was once a rite of passage for family has now been mostly outsourced to licensed professionals - caring for our elderly.  While most Long Term Care is actually funded via state welfare assistance programs, anyone with assets should be planning for the very real possibility of needing Long Term Care (about 1 in 2 once you live to age 65) and how this will be funded.

After government programs, self pay is the second largest payer of Long Term Care services, followed by insurance.  It’s obvious that “most” people have chosen to self insure rather than transfer their personal risk of needing Long Term Care over to an insurance company through the purchase of Long Term Care Insurance.
 

The Problem: People Forego LTC Insurance
With odds of using a policy much higher than a house fire or car wreck, which most still buy insurance for, why haven’t consumers jumped in to LTC insurance in higher proportions?  One impediment for many people is the fact that they may buy a Long Term Care plan and never make a claim - effectively making them feel as if they’ve wasted the premiums paid.

A Solution: Hybrid Policies with Guaranteed Payout

Insurance actuaries determined that they could help people plan for the risk of a catastrophic need for Long Term Care while still guaranteeing a return of premium by combining Life insurance, which often has a linked cash value, with Long Term Care Insurance.  The hybrid was born, and is now found in several permutations offered by major insurance companies like John Hancock, One America, Nationwide, Lincoln National, and Pacific Life.

Premium Payment Options

You can opt to pay for these hybrid policies in multiple ways.  When doing Long Term Care planning, it’s important to weigh the differences and pros and cons of some of the various payment methods.  For some, a single premium is convenient and do-able.  For most, an annual premium is more manageable.

• Single Pay.  A single premium payment option is available for those with assets parked in non-performing investments such as CDs or even IRAs.  By transferring money from this asset class to a LTC hybrid insurance policy, you may be able to better put that money to work with the promise of a full return of premium should you decide to go another direction in the future.
   
• Standard Annual Pay.  Most of the hybrid policies sold opt for a more “traditional” annual premium that provides a combination life and Long Term Care benefit.  Should you die without needing the LTC benefit, a death benefit may go to your named beneficiary.  By paying for this type of policy annually, you are not having to tie up a large sum of money in this insurance vehicle.