Hybrid Life Insurance policies are Traditional Life insurance polices that offer ‘Living Benefits’ for Long Term Care or a Chronic Illness. These policies have been created by insurance carriers as a direct result of a troubled traditional individual Long Term Care (LTC) insurance industry. Unfortunately many carriers have discontinued selling Traditional LTC policies and have sold their individual LTC business to other carriers. The number of carriers that offer traditional LTC policies has decreased drastically and the few that are left have had to increase premiums for individual Long Term Care policies.
The need for having some level of Long Term Care protection in place to hedge against poor health in our later years and protect our assets is real. Please click here to review our Long Term Care page for more information and statistics regarding the need for long term care. However coming up with the right product solution is the question and it may not be the same answer for everyone – there is not a one size fits all solution. Each person and families situation is different and the need for insuring this risk needs to be analyzed accordingly.
Most people are on a fixed income during their retirement years. The issue of increasing premiums for traditional LTC policies is a big concern for those trying to budget on a fixed income. Nobody wants to get double-digit premium increases over and over again in their 70’s, 80’s and never mind 90’s. This has become a nagging issue for the traditional LTC marketplace. The other concern is “what if you die after paying years into a traditional LTC policy without needing a day of long term care”? All the premiums paid are lost unless you include an expensive ‘Return of Premium’ Rider.
How about if you could purchase a life insurance policy that incorporates an LTC benefit? If you don’t need it, your heirs collect on the life insurance policy, and rates can be GUARANTEED! These hybrid policies are getting traction in the market. New policy sales are steadily rising according to LIMRA, the industry research and consulting group. By contrast, sales of new individual traditional LTC-only policies are decreasing.
With a hybrid Life/LTC you win rather you need LTC or die never needing care. If you live and need LTC care benefits are provided – however if you die never needing LTC your beneficiary will receive the policy death benefit. Someone is going to get the benefit of all the premiums you have paid into the policy. There are other hybrid policies where you win rather you live, die or quit. These policies offer the same features as above, however include a ‘Return of Premium’ option in early policy years.
There is no ‘one size fits all’ solution with this type of planning, every situation is unique and needs to be evaluated on its on circumstances. In some cases some or all of a Traditional LTC policy premium can be deducted for income tax purposes, if you are self-employed or have a HSA plan – the deduction can be more attractive. If you are offering coverage to employees, work for an employer or non-profit organization offering these plans as a selective benefit – or if you are an Owner/Employee of a C-Corporation there are other tax advantages to consider.
At Kelley Insurance & Financial we are very familiar with both the traditional and hybrid LTC markets. We can navigate you to the best product solution to insure this very real risk. Please contact our office today so that we may discuss your specific situation and make recommendations for your consideration.