A Hybrid Approach to Long-Term Care Insurance

When you become seriously ill or injured, nursing home care can be astronomically expensive. You might also know that Medicare would cover only a minimal amount of those costs. Private insurance doesn’t seem like a good bet if you’ve heard horror stories about skyrocketing premium costs and difficulties in obtaining long-term care (LTC) insurance in the first place.

The Benefits of Hybrid Long-Term Care Policies

“Hybrid” policies essentially combine life insurance or an annuity with LTC coverage. The unique benefits are also known as:

·       Accelerated death benefits

·       Living benefits

·       Life/long-term care

·       Linked benefits

·       Combo policy

Flexible Coverage

This type of policy will pay if you need nursing care, but if you never need that, then the policy functions like standard whole-life coverage. It’s a win-win. Say, for example, you buy a hybrid policy with a $100,000 death benefit. You eventually need $50,000 of that coverage to pay for LTC. Then, when you pass, your beneficiary would receive a $50,000 payout from what’s left of the original $100,000 coverage.

Tax-Free Benefits, Return of Premium, and Locked in Rates

Some plans offer tax-free death benefits to your heirs if your LTC benefits are not fully used or needed. They may return your premiums if you change your mind down the road. Premiums can be locked in from the initial purchase date, with a guarantee that they will never increase. Those who already hold a legacy policy with a large cash value may be able to roll that value over, tax-free, into a new hybrid policy.

Lump Sum Premiums

For those who can afford to pay premiums in a lump sum in advance, LTC coverage could amount to as much as twice the face value of the policy. Compare that with simply setting money aside for LTC expenses at a rate of five percent interest. It could take as long as thirty years to save for the payout the policy offers.

A Variety of Options

There is a wide range of coverage, depending on the policies. They may cover different services, delivered at home, in a facility, or both. The monthly or daily benefits can vary. Some policies require an elimination period (a delay between the time a doctor qualifies you for coverage and actual payment); some do not. Some provide inflation protection. Some provide adjustable rates, weighing how much the insured might need LTC  against the death benefit.

When choosing an insurance carrier, always remember that the company must have long-term financial stability to pay claims and remain in business for decades to come. You can check the company’s financial strength at four major agencies:

• M. Best Company
• Demotech
• Moody’s Investor Service
• Standard and Poor’s Corporation

To sort through all these intricacies, the National Association of Insurance Commissioners has issued a free and comprehensive Shopper’s Guide to LTC Insurance.

Estate planning and elder law attorneys can create a long-term care plan that incorporates a hybrid LTC plan in an irrevocable trust that will protect all of your bank accounts and real property (like your home) in the event you need long-term care services. If you are interested in protecting your savings and home, reach out to our firm.

We hope you found this article helpful. If you have questions or would like to discuss a personal legal matter, don’t hesitate to contact our office at (603) 770-9135. We look forward to the opportunity to work with you.