With many people unwilling to purchase long-term care insurance policies due to the cost, insurers are rolling out new products that combine long-term care insurance with either a life insurance policy or an annuity. These new products have been on the market for a while, but they are gaining in popularity as distributions from life insurance and annuities became tax free when used to pay nursing home costs in 2010.
Even though long-term care costs continue to rise, long-term care insurance purchases are not popular. Long-term care insurance is expensive and many people do not want to pay premiums for something they might not need. A hybrid product has the benefit of combining two products into one. If you don’t use the long-term care insurance, you can still benefit from the life insurance or the annuity.
The products vary in the details, but the general idea of a hybrid life insurance policy is to allow a buyer to purchase a cash-value life insurance policy and to use a portion of that policy for long-term care benefits, if necessary, and keep the rest as a death benefit that will be paid to the purchaser’s beneficiary. If long-term care benefits are used, the death benefit may be reduced.
Hybrid annuity products also vary significantly, but in general they allow a buyer to purchase a fixed deferred annuity with a long-term-care rider attached. The annuity may pay out for a specific number of years or for life. For example, a purchaser could deposit $150,000 into an annuity. The annuity would provide approximately $4,700 a month of long-term care benefits for 36 months. For an additional cost, the purchaser could get the $4,700 monthly benefit for life.
While a two-for-one product may seem attractive, these products are not for everyone. For one thing, you may have less flexibility with a combined product than you would with a stand-alone product. Hybrid products may not cover home care or include inflation protection, for example. In addition, hybrid products may not offer enough long-term care coverage for what you need. It is impossible to predict exact coverage needs, but click here for more information on how to figure out how much insurance to purchase. A hybrid product is likely less expensive than purchasing two separate products, but it is often more expensive than purchasing a stand-alone long-term care insurance policy.
As with any major purchase, you need to evaluate it carefully before purchasing. Before deciding what to buy, get advice from an impartial investment adviser not a sales agent who makes a commission off the sale of policies.
Hybrid life/long term care insurance policies are very popular today with consumers and you may be attracted to the guarantees that hybrid long term care policies will provide to you namely fixed guaranteed premiums, long term care benefits if care is needed, and life insurance benefits if care is not needed. This being said, you still deserve to get your money’s worth for your premium deposit. Just because an insurance company is promising to give you your money back should you never need long term care, does not warrant a foolish decision to accept benefits of $5500 month when your same premium outlay can buy you $10,000 monthly benefit. You still need to be smart and obtain the best value for your premium outlay.
For more information on long-term care insurance, click here.
For more information hybrid long-term care insurance policies, click here.
If you would like your policy reviewed call for an appointment 270-684-8400.