What You Need to Know: Hybrid Long-Term Care Insurance

 In Insurance

People nearing retirement age have started to consider hybrid products that combine
long-term-care coverage with potential life-insurance benefits. Last year, 260,000 of these
policies were sold, roughly four times more than the number of traditional long-term-care
policies. In the past, long-term-care insurance products were pushed on clients, but consumers
hesitated because of the potential wasted money if the service wasn’t needed along with the
fact premiums on these policies have jumped.

So, what can the hybrid offer to make it an attractive alternative? For starters, if the
long-term care isn’t needed, the money isn’t wasted, their beneficiary will receive the death
benefit similar to a life insurance policy. In addition, premiums for these policies have been
more stable over time than stand alone long-term-care policies because the buyer typically
pays a single, or series of set premiums over time. Some policies even offer a return-of-
premium option that also adds some attraction.

Sounds perfect, right? Not so fast. While these products have some great additional
benefits and prices are more stable, they can also be quite costly. They have the potential to
cost more than the traditional long-term-care policies because of its combination nature along
with the added death benefit component. The benefit period can also be shorter than
traditional policies. Although the extra costs can deter some consumers, you and your
beneficiary can reap the benefits of paying these premiums, unlike traditional policies which
can end up being money down the drain.

Here are a few things to keep in mind about hybrid products so you can see if one may
be right for you:

1. Not every hybrid is created equal

Insurance companies offering these products offer them with varying features and price
points. Selecting a policy will be dependent on your situation, such as how much death
benefit a person may need or how much long-term-care could be needed. They can also
differ in what kind of care is covered, whether it’s home, facility, or both or they can
differ in the ways they cover such as monthly, daily, or even inflation protected. It’s also
important to keep in mind that many policies would begin coverage right away, but
some have a waiting period which is something to keep an eye on. Other factors to
consider are also the length of coverage, the way benefits are paid out, and the carrier’s
rating. It is our number one rule to always fully understand what you’re investing in.

2. Cost can vary widely

When these products were first introduced, their huge six-figure, upfront payment
prohibited many consumers from purchasing them. Since then, insurers have made
payment easier through payment options that can work with their budget. Factors such as the insurer, how often and how long premiums will be paid, along with a few others
can greatly influence the price of the policy. Some consumers can expect to pay
between $60,000 to $100,000 for a one-time lump sum. Those paying more upfront can
expect to pay less overall, but for those who can’t afford the lump sum can spread out
premiums over several years.

3. Delaying could mean higher rates

Advisers typically recommend these policies to people aged 50 to 65 because premiums
for life insurance increase with age. Delaying the purchase increases the chances of
being in poor health, therefore the insurer will either charge a much higher premium or
deny the coverage altogether. Although care coverage is something we overlook while
in good health, purchasing these policies while in good health can have significant cost
benefits.

4. Shop around

As you can see, there are many factors and options when it comes to hybrid policies. It’s
recommended to shop around for a policy that fits your budget and your needs since
each carrier will vary from the next. You don’t purchase the first car you look at, you
shop around and make sure it’s got all the right gadgets for the right price and the same
should be done for your long-term care. On top of comparing prices for a hybrid policy,
you should also compare the cost and benefits against a traditional long-term-care
policy as well to see if it could be more appropriate for you.

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