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Jun 7th, 2022

Return of Premium on Long-Term Care Insurance Plans

Return of Premium refers to a policy where you get your money back either in full, or in part if no other insurance benefits are used. If you'd like to see personalized quotes for your specific situation, compare your options.

Return of premium policies are more expensive than standard policies, because you are guaranteed a benefit one way or another.

Refer to your specific policy for the details of how your policy works. If you're shopping for a new policy, continue on for details about current offerings.

Return of Premium via Hybrid LTC Policies

In 2022, Hybrid Long-Term Care Insurance plans are the "Gold Standard" for getting your money back. Every policy is different, but many of the popular Long-Term Care Insurance policies include a 100% return-of-premium as a Life Insurance benefit.

"Hybrid" plans typically combine a small life insurance with a much larger long-term care benefit

Some recent market changes mean that not all Hybrid long-term care plans offer 100% of your premium as a death benefit, so be sure to look carefully at that detail. We almost always suggest plans that offer 100-150% of your premium as the death benefit.

For example Securian SecureCare once offered a 100% return of premium via either cash surrender or the life insurance benefit, but in 2022 introduced a "Max LTC" rider that reduces death benefit in some cases to 65-70% of premiums paid.

  • Bottom line: Shop Around multiple insurance carriers, or use a free service like ours to compare your options.

If you're not familiar with hybrid long term care insurance, click here to learn more.

Why are Return of Premium Policies so Interesting?

Return of Premium is attractive to many because the thought of getting back your money if little or no Long Term Care services are needed makes sense. You'll need to ask yourself a few questions, however.

If you're curious, you can get a quote that will show your specific costs and benefits here. It takes only ~60 seconds to kick off the process.

Now, let's get more technical...

Surrender Value vs. Life Insurance Benefit?

Surrender Value: What it Means

If you're looking to potentially cancel your life insurance policy, and get a full return of premium, you'll want to look at hybrid policies.

Most hybrid long-term care insurance policies offer less than 100% surrender value if you just want to cash in your policy. This means you need to be committed to keeping your policy when you buy it, or you may lose money when cashing it in.

Return of Premium as Life Insurance

For many, the "return of premium" is more conceptual, as it can be paid as Life Insurance tax-free to their named beneficiary.

In fact, most plan designs return not only the original premium, but have a death benefit that is higher than the premiums paid.

As an example, a 50-year-old Female in Georgia who pays a single premium of $101,290 will receive a death benefit value of $144,000.24 - a 42.5% increase over premiums paid.

Taxes: Beware of the Pitfalls

All of the mainstream hybrid long-term care plans pay life insurance and long-term care benefits 100% tax-free. Surrendering a policy can actually incur taxes even if you paid in, say, $100,000 and only received $100,000 back at Surrender.

Paying taxes on a surrender of your policy may be confusing. This applies to all things tax-related. It comes down to the fact that, inside your policy, dollars were being generated to help pay premiums for the long-term care insurance coverage.

While you didn't pay a penny, your policy was essentially "charging itself" the fees. If you never surrender your policy there's nothing to be concerned about.

Expect a tax bill if you decide to surrender your policy using its 100% surrender value, if available. If all of this is confusing, don't feel lost.

Not All Hybrid Plans Have Good Surrender Values

Some hybrid plans may have very poor surrender values. Here's an example where a 50-year-old pays $101,290 in premiums and only would get back $46,488 if they surrendered the policy 9 years later at age 59:

This reality underscores the importance of working with someone who has integrity and can show you the pros and the CONS of the policy you're considering! (Request a comparison quote now)

Article Archive:

If you're interested in a historical "Traditional" policy (yours or that of a parent) you may find these older definitions from Traditional policies helpful:

There are three incarnations of Return of Premium, and each company selling Long-Term Care Insurance coverage will offer at least one:

Full Return of Premium

Often not available on modern policies.

Return of Premium, often referred to as “full return of premium,” will give your beneficiary a death benefit equal to the sum of your LTC premiums paid over time.  This is available with several carriers, including Mutual of Omaha, and is the most expensive option you can buy of the three Return of Premium options.

In our example case, the premiums for a standard 3/150 for a “Standard” rated 59-year-old were $2,441 and adding the full “Return of Premium” rider made them $7,789.  WOW!

Return of Premium Less Claims

Often not available on modern policies.

This option is as simple as it sounds, but is rare to find on plans in 2022. It was never a very good option to add anyway, so not having it on the market is not a big loss.

  1. Return of Premium less claims: the sum of your LTC premiums paid are returned less any claims paid.  So: you paid in $25,000 but used $15,000 in claims dollars before dying, your beneficiary would receive back $10,000 in premiums.
  2. More likely, you either don’t use the policy and they get everything back, or you use it and use significantly more than you paid, meaning they get nothing back.  The biggest risk with this option is that you pay more for it for many years and then use your benefits to their fullest extent, meaning you paid extra for this but don’t benefit from that extra cost at all.

Why we never liked it: The problem with this is that if you make a claim, you’ll likely have paid extra for this option for many years to no avail, because you’ll quickly surpass your payments over the lifetime when on a claim.

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