Mutual of Omaha & Long Term Care Annuity

As many Americans share a life-long goal to secure a financially well off and stable retirement, asset-based long term care has gained increasing popularity. Long standing firm, Mutual of Omaha is one of the few and best rated insurers to offer a long term care annuity insurance policy. This policy features a single premium and is known as their Living Care Annuity plan.

What is a Hybrid LTC Annuity?

A hybrid LTC annuity is your typical deferred fixed annuity which features a set interest rate. The way it works is your account will grow year after year with compounded interest after you present your first lump sum payment. In the case that you do not access any interest, your interest gains will then accumulate tax-deferred. One of the main benefits presented by a hybrid LTC annuity, is that it provides leverage for LTC costs. More so, the annuity offered by Mutual of Omaha leverages your investment as much as 3 times over for assisted living, nursing home, in-home health, adult day care as well as other types of LTC associated expenses.

Mutual of Omaha Hybrid Living Care Annuity

For a clear depiction of how Mutual of Omaha's hybrid annuity works, let's use this example.

A policyholder named Eric invests $100,000 in the hybrid annuity. This amount with increase year after year at a specific interest rate and performs as a traditional fixed annuity with the benefit of a tax deferral. The goal is for the $100k investment to transform into a $300K pool so that the owner may access it for 2 years later for LTC costs. This new pool of money ($300k) will be available for a minimum of 6 years, at least $50 annually, in addition to interest growth.

Considering an interest rate of 3%, the $100,000 reaches $106,090 following 2 years. This is leveraged 3X over to $318,270. If you consider this against the 6 years and divide, the policyholder gets $53,045 per year for at least 6 years. This amounts to $145 daily. In a scenario where less than the $53,045 is needed on LTC per year, then the policy would last over 6 years. The differing factor between traditional long term care policies, and this one is that it is not a use-it-or-lose-it scenario.

LTC Rider Costs

The LTC rider featured by Mutual of Omaha long term care policy does have a yearly cost. The yearly cost is subtracted from the interest rate earned annually.

An example, if the policy has an interest rate of 4%, however the LTC rider fees amount to 1%, then the effective credit for the annuity is 3%. You should note that rider costs and interest rates may vary and subject to economic conditions.

Medical Underwriting

Similar to most traditional coverage plans, Mutual of Omaha's hybrid LTC policy does require medical underwriting. It is a requirement that policyholders answer 12 pre-qualification questions, as well as complete a phone interview. Those who've been denied other types of LTC coverage may not qualify for this plan. In comparison to traditional plans however, Hybrid annuities do tend to require much less extensive health underwriting.

Compare Side-by-Side Long-Term Care Plans in 3 Minutes

Applicants must prove and qualify for insurability prior to purchasing Mutual of Omaha's hybrid LTC annuity. Note that, only once the policy has been active for a minimum of 2 years then will the benefits be accessible.

Inflation protection

In addition to the annual fixed interest rate, this policy also offers inflation protection. However, the annual interest growth rate provided may not be enough to counter inflation. For policyholders who desire inflation protection, a 5% compounding inflation rider is offered only at time of annuity purchase (not later).

Is this for me?

When compared against traditional LTC policies, Mutual of Omaha's hybrid long term care annuity offers strong advantages. With this policy, owners can retain optimal control over their investment. Owners can also withdrawal their invest (subject to withdrawal fee). Available monthly, are the accumulative interest which most owners opt to reinvest the so that their policy can grow further each year.

Let's assume that you require little to no LTC, you now posses an asset to pass down to your beneficiaries. If you're concerned about funding and losing a traditional LTC that is never needed, this policy is a reasonable option.

1035 tax-free exchange

For those who already have an existing annuity policy in place, you can easily replace it for Mutual of Omaha's hybrid policy through a 1035 tax-free exchange. This is quite sensible for individuals who posses a considerable deferred income within an ongoing fixed annuity or those who wish to ditch volatile, or unsatisfying annuity account.

Tax treatment

Mutual of Omaha's Living Care Annuity is a tax-qualified policy. This means that the LTC rider cost is NOT subject to income taxes. The payouts from this policy are similarly, NOT subject to income taxation.

If you want to learn more about the Mutual of Omaha hybrid long term care annuity or wish to compare this policy against similar ones from other to providers, get in touch with us!