Hybrid long-term care products are not new. In fact they have been around for more than 25 years. It is just that many of the recent concerns about traditional long-term care insurance have brought attention to hybrids.
Hybrids are a combination of LTC insurance and either life insurance or annuities.
The original versions were mostly single premium permanent life insurance with a rider that lets policyholders pay LTC expenses from the death benefit. If that was exhausted, most plans have a rider that will cover more LTC if needed and in some cases an unlimited benefit. Additionally, some annuities offered similar types of benefits, just on an annuity chassis.
So why did consumers buy these products? Most where wealthy clients and could afford the larger premium associated with this these hybrids. They could leverage their money for much more coverage. If you don’t need LTC, hybrids will return your money or parts of it to their beneficiaries. These plans also offered the option to get your money back. Therefore, clients got the owner versus renter type of insurance coverage. Many look at this as a smart way to self-insure.
In that last 10 years or so, many carriers have added expanded versions of hybrids. Multiple pay Life/LTC products have boomed and opened up the market to not just the wealthy. Individuals or couples can purchase a whole life / universal life hybrid and pay annually for any number of years they choose and get the security that if they don’t need LTC, the premiums they paid were not a “waste”. After all, that is one of the greatest concerns consumers have when considering long term care insurance. Compared to most LTC insurance plans, the premiums will be much more, but the sense of security that they could get the money back, weighs heavy.
Additionally, most hybrids are guaranteed never to go up and therefore, consumers feel better about the rate increases LTCi have been experiencing in the recent years.
Annuity hybrids have also seen rapid growth in recent years. Annuities can tend to be easier to health qualify for since they don’t usually leverage for as much LTC as their life counterparts. Annuities can be funded from other types of annuities and the tax savings of converting them can be extremely beneficial. On the downside, annuity hybrids are mostly only single premium and many really don’t leverage for more LTC than the annuity value. Therefore, many annuities are still self-insuring, you just get some good tax benefits.
Like most financial products, some are better than others and everyone’s situation and finances are different. Traditional LTC insurance may still be best for many consumers. You just need to consult with a long-term care panning specialist to determine which is best for you.
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