11/07/2017
Hybrid Long Term Care Life Insurance Policy
Now before we explain the ins and outs of hybrid policies, there are 2 primary types you need to understand:
Life Insurance with an Accelerated Death Benefit Rider, which can be used for qualified long term care needs – In this case, if the insured needs in-home care or nursing home care, they pull the money from their life insurance policy and it reduces their death benefit. It’s just accelerating your death benefit. This is typically a FREE rider, although not all companies offer it yet.
Life Insurance with a LTC Rider – this is a policy that has LTC benefits built into the policy, but at an additional cost.
In both cases, LTC riders don’t usually include term policies (Prudential is the only carrier who has a Living Needs benefit on their term policies) and generally are only available with permanent policies such as Universal Life, Indexed Universal Life and Whole Life policies.
More on Accelerated Death Benefit Riders
…hybrid life insurance and long-term care policies give the policy owner access to the majority of the death benefit if long-term care services are needed. New and Unexpected Ways to Fund Long-Term Care Expenses, Jamie Hopkins, Forbes
When you require any benefits paid out under these hybrid life insurance policies, you essentially receive accelerated benefits that would have been available to your beneficiaries under ordinary circumstances.
This means that your death benefits are reduced equivalent to what you receive for long term coverage.
Be cautious though, some insurers will only qualify your LTC coverage for a percentage of your death benefits which you receive on a monthly basis. This may result in the amount received being insufficient for your long term care costs.
Some insurers also may add a percentage cap where the maximum amount you can use towards LTC would be no more than 50% of the total amount of the death benefits on your policy.
Cons of Annuity and Life Insurance Hybrid Long Term Care Riders
There are several things to keep in mind when considering these types of hybrid long term care riders:
• Life insurance hybrid packages will result in the reduction of you death benefits which could affect the income you plan to leave to your survivors or towards future estate taxesannuity with long term care rider
• If using an annuity, how will the reduced amounts used towards LTC affect your retirement income?
• The amounts you receive with a hybrid insurance policy may not provide enough coverage towards your LTC needs because of the cap and percentage amounts provided
• Although many of these types policies have some form of inflation protection built into them, will it be enough to cover the rising costs of long term care coverage down the road?
The Bottom Line on Long Term Care Riders
First off, almost everyone should have some long term coverage in place because most people are going to need it at some point in their lives.
Types of coverage, policies and costs vary wildly between insurers so you need to sit down with a knowledgeable independent agent to fully understand your choices and your life insurance needs before you select a long term care coverage option.
We have access to dozens of life insurers so we can help you find the right type of life insurance long term care coverage that you need right now.
Call us at 619-846-4523 to discuss your options.
