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Hybrid Long Term Care Insurance Policies with Life Benefits

Updated January 14, 2021.


Written by Drew Nichols and Darrick Wilkins

"Simply put, the market is moving towards hybrid policies, which make more sense and provide solid guarantees."

Who Should Buy Hybrid Life + LTC?

With financial markets at All Time High (ATH) levels, savvy investors approaching retirement are increasingly taking some risk off the table. Hybrid Long-Term Care Insurance policies can allow you to receive a 100% preservation of premiums paid while, simultaneously, providing significant leverage (3-8x) in the event you need Long-Term Care services. (Home care is most common.)

By moving a small portion of your investments from stocks or bonds to guaranteed insurance policies with cash value, you can secure some gains while providing significant leverage on your money should you need Home Care or even nursing home or assisted living services and assistance later in life.

  • Takeaway #1: Re-allocate a small portion of your portfolio to protect a large portion of it.

The latest statistics from LongTermCare.gov indicate that 70% of those who live to age 65 will need long-term care.

Can I Qualify?

You must be healthy to be considered a candidate for Hybrid LTC policies. A complete health history is taken into account.

Chronic conditions can be knock-outs, but especially histories of cancer/stroke/heart attack or any bone or joint issues can be enough to make obtaining coverage a challenge. The insurers are looking for the most healthy policyholders, especially in a COVID-19 world.

If you are healthy, on "maintenance medications" for conditions like high blood pressure or cholesterol, you'll have no problem finding a policy. A quick phone call (and we mean under 5 minutes) will establish your potential insurability.

  • Takeaway #2: You must be healthy to buy this. A specialist can help you find the right company.

How Do I Compare Hybrid LTC Companies?

When you are considering paying a one-time premium of something like $100 - $125k, or $7-$15k/year in premiums to an insurance company, you only want an A+ rated or better company. There's just little advantage in taking the risk of going with a lesser company.

That said, there are several A++ rated companies out there as well who sell hybrid coverage options.

A few of the major players in the Hybrid Long-Term Care Insurance companies:

What About Pay-As-You-Go Policies?

Why can't I just pay every year for this insurance like I do for my other policies?

LTC policies have "traditionally" been paid year by year, for a few thousand dollars a year. As time went on, even the best companies began to change rates on policies years after the sale, and those predictable annual payments people were making became less predictable.

If you're investigating Long Term Care Insurance, you'll want to also compare a Hybrid LTC policy where you purchase a policy and have it completely paid off in a 1, 5 or 10-year payments. Best of all, premiums are almost always guaranteed and so are your benefits in the future. If you see "Non-Guaranteed" values on a quote, ignore them.

  • Takeaway #4: Only look at Guaranteed quotes. Everything else is a rosy projection and could change -- and not in your favor.

How Much Does It Cost?

We analyzed the top three selling Hybrid Long-Term Care policies in 2020 and came up with the following chart:

Traditional Long Term Care Insurance rates can be increased, so it's wise to look into hybrid long term care insurance because this product has a guaranteed premium.

Hybrid Long-Term Care Insurance policies also has a life insurance policy at least equal to premiums paid in built into the plan that is paid out to the family tax free at death if care is never needed.

Who Sells Hybrid Long Term Care Insurance?

Insurers have embraced the idea of offering Hybrid Long Term Care coverage with a 1,5 or 10 year premium payment choices. Over a dozen cutting edge hybrid-LTC products have hit the market in the last five years.

Companies from John Hancock, Nationwide, Minnesota Life, Lincoln to Pacific Life are big players here, offering Long Term Care benefits as part of a larger life insurance policy.

  • Takeaway #5: Some of the major "Blue Chip" companies offer very good Hybrid Long-Term Care Insurance policy options.

Cash Indemnity Benefits Are More Consumer Friendly.

Cash Benefits are another major advantage of hybrid policies offered by both Nationwide and Securian's Minnesota Life. Cash is king, as they say, and it's no different in the LTC world. Cash benefits mean you can spend your benefits dollars as you see fit without having to get care providers (at home or in facility) approved.

The flexibility and lack of paperwork can be a big advantage if you want to save yourself time in the future. If you have kids, they will thank you for buying a cash indemnity policy. Some companies literally don't even have a claim form; once eligibility is confirmed they just mail the money each month.

The trend has been towards cash benefits as more and more consumers see the pitfalls of having to submit receipts each month. Some of the cash indemnity hybrid long term care plans literally don't require a claims form. Ask your advisor about this, as it is important to think about the "flip side" of the insurance coin.

  • Takeaway #6: If you can, get cash indemnity benefits payments instead of reimbursement policies. In 2021, the cash policies are actually less expensive than many reimbursement policies.

Example Quote for a Hybrid Long Term Care Insurance Policy

Let's take a healthy 62-year-old male and consider "traditional" Long Term Care Insurance quotes vs. a Hybrid Life Insurance / Long Term Care policy from one of the A+ rated insurers that offers these types of plans.

This particular client would pay $3,340/year for traditional LTC benefits[1] of $306,000. The same client would have to make a single premium payment of $100,000 to purchase a hybrid policy with similar benefits of $339k in LTC benefits and $113k Life Insurance benefit paid to the family if care is never needed. Here's a table of the benefits schedule:

This table continues, but the trend is clear. Long Term Care benefits (in the last column) grow while the death benefit shrinks with age until it levels off at $113k.

Considering you are more likely to die the older you are, this may seem counter intuitive, but keep in mind the reason you purchase these policies is to protect against Long Term Care. The Life Insurance benefit is almost like a bonus, or hedge in case you never used your LTC coverage.

Can I Pay For a Hybrid Long Term Care Policy From My IRA?

It may be possible to pay for a hybrid policy from your retirement account (IRA) via a SPIA which stand for Single Premium Immediate Annuity. Life insurance policies cannot take IRA 1035 exchanges, but annuities can. You transfer the IRA money to the annuity and the annuity then pays the premium.

As with any complex tax issue, consult with a CPA before making any decisions about moving money into or out of one of the hybrid LTC plans. The IRS has a few resources on the topic here and here.

Comparing Life Insurance with Long Term Care Rider to Regular Long Term Care

Every situation is different, and premiums are based on your age, state, health, and martial status. Consult with a qualified adviser (you can do it online, below) who can go out and search the market to compare your options when it comes to which Long Term Care policy to consider.

See the chart below to view how the power of compound interest will grow your benefits over time.

Protection From Rate Increases

Hybrid Long Term Care Insurance plans' premiums are guaranteed to never increase. This gives you the ability to plan ahead knowing you Long Term Care plan is locked in so you can enjoy retirement. As with any financial decision, having a trusted adviser is the most critical element.

Avoid taking advice solely from your financial adviser, especially if they sell these products. They often have their hands tied to one company only, leading to biased advice. We work with every company and will shop the entire market with once source as opposed to having to go to multiple people all telling you how the single product they sell is the best.

Here at LTC Tree, we work with every company and have no preference to any one company. Objectivity is the key and objectivity is in our company's DNA.

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