Hybrid long-term care life insurance combines the benefits of long-term care insurance and life insurance into a single policy. It is a permanent life insurance policies with a long-term care rider. Hence, it leverages your payment(s) for two purposes:
- to create long-term care benefits to pay monthly long-term care expenses
- to create a life insurance death benefit in the event you never need long-term care.
Hybrid LTC-life insurance comes with added benefits. For example, you can get desired coverage for a guaranteed premium amount. Also, you have the option to surrender your policy for a guaranteed return of premium if you ever change your mind.
Here’s an illustration of what a Hybrid LTC-Life insurance can do:
How does a Hybrid LTC-Life Policy work?
Hybrid LTC-Life insurance works by using an “accelerated death benefit” and a long-term care insurance rider. The accelerated death benefit feature uses your policy’s death benefit for qualified long-term care expenses. After the death benefit is exhausted, your policy uses the long-term care insurance rider to cover these expenses.
Benefits of a Hybrid LTC-Life Solution
Now from my experience, there are two common concerns folks have when it comes to long-term care insurance. They normally ask me:
- “Do I get my money back if I never need long-term care?”
- “Will my premiums increase over time?”
Well if this is your concern, then Hybrid Long-term Care Life insurance is right for you. First, however, it is important to know that this type of long-term care insurance is not for everybody.
Hybrid Long-term Care Life insurance is, essentially, a want solution not a need solution. This type of long-term care insurance is for people that want valuable coverage and guarantees. In addition to this, more importantly, it is for people that want peace of mind knowing their family us protected from long-term care consequences.
Hybrid Long-term care Life insurance offers valuable coverage, guarantees, and peace of mind by providing:
- Long-term care insurance benefits in the event you need care
- Tax-free life insurance death benefit in the event care is not needed
- A guaranteed return of premium if you ever change your mind
“Use it or lose it” and premium increases are not a concern for individuals who get Hybrid Long-term Care Life insurance.
Funding a Hybrid LTC-Life Insurance Policy
Hybrid LTC-Life insurance is typically funded using your previously acquired assets. For example, you might allocate a portion of your savings to fund a Hybrid LTC-Life policy.
Sometimes people use funds that financial advisors refer to as “lazy money.” Those are funds that sit in your account not serving any real purpose or getting any significant gains .
When placing fund(s) in Hybrid LTC-Life insurance, you are essentially making sure your assets will accomplish a useful purpose or be returned in the event you never use it.
Case study: Tom Jones
Let’s consider a case study to better understand long-term care planning using Hybrid Long-term care Life insurance. (Tom Jones is a fictitious name we will use for this case study.)
Tom is a 60 year old male with a successful career looking to retire in the next 5 years. He has worked his entire adult life and has made some wise financial decisions during that time.
Tom is glad to know that he has accrued enough assets to enjoy a comfortable retirement. However, Tom begins to recall what it was like caring for his mother who suffered from Dementia before passing away.
Now that he is considering retirement, he is very concerned about what might happen if he ever needed long-term care. Below is a chart of Tom’s assets that he can use to pay for care:
Rather than pay for care out of pocket, Tom decides to reposition $100,000 of his assets into a Hybrid Long-term Care Life Insurance policy. The policy Tom selects leverages his single premium contribution to create a Long-term care Benefit Pool of $400,000 with a death benefit of $125,000 if he never uses it. In addition, if Tom changes his mind 6 years into the policy for example, he is guaranteed return of premium.
Hybrid Long-term Care Life insurance works to keep Tom’s assets in tact. Tom will not need to liquidate his assets in the event Tom needs to pay for long-term care services. It creates a strong long-term care plan that gives him peace of mind. In the end, Tom is left feeling confident knowing he has made another wise financial decision.
Is a Hybrid LTC-Life Solution right for you?
Some financial experts would argue against putting your money into a Hybrid LTC-Life insurance policy. They believe it is better to first invest your funds. Then after investing it, use the interest gained to buy a traditional long-term care policy as it is less expensive.
I can understand that perspective. However, to be honest with you, if you are overly concerned about losing possible market gains on your funds than this product may not be right for you.
However, if your goal is the peace of mind knowing you have:
- Long-term care benefits guaranteed
- Premium amounts that will not increase
- Your money back if you never need coverage
than a Hybrid Long-term Care Life insurance policy is right for you.
Hybrid Long-term Care Life insurance offers guaranteed protection with added flexibility. It is a strong tool and a great solution for long-term care planning. In addition, it can be of great use for those looking to utilize a portion of their savings.
Now your must know there are multiple hybrid LTC-Life insurance products available. In addition, each product can be designed in a number of ways. Hence, it can be a bit overwhelming if you are presented with multiple illustrations from different companies .
Before you consider or compare policies that may fit your needs, I encourage you to read our post “5 Things to Review in Every Hybrid Long-term Care Policy.” In it we discuss what 5 factors consider when comparing & reviewing Hybrid Long-term Care Life insurance policies.
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