When planning for retirement, most people overlook long-term care medical expenses. Unfortunately, the cost of long-term care in this country can be devastating, dismantling even the most sound of retirement plans while at the same time leaving your spouse or family in financial disarray.
It’s easy for people to dismiss traditional long-term care insurance (LTCi), mostly due to the lack of rate guarantees, considerably high cost, and the concern that it might never be needed. More clients choose to self-insure through certificates of deposit, savings accounts, annuities, mutual funds and other similar vehicles to help cater for LTC costs if at all they will be needed. But these types of assets do not provide real leverage, however, and might not even cover medical expenses for that long.
Here comes hybrid long term care insurance
Recognizing that fewer consumers are interested in purchasing traditional LTCi policies, more insurers have come up with hybrid plans that allow policyholders to retain and control their deposits. In addition, hybrid policies also provide protection from the high costs of long-term care.
Hybrid plans are sold by different insurance companies and are available in a variety of packages, but nearly all of them can be classified into either annuity or life insurance plans. The majority of hybrid policies require the policy buyer to make a single, lump sum deposit. Once it’s funded, the hybrid policy will then provide room for growth through interest rates, and optional inflation riders. The policy owner not only retains control over their funds, while allowing a much larger pool of money to grow should they need extended care.
Why hybrid LTC plans are more popular
Hybrid annuity and life policies do provide several benefits compared to traditional plans, and self-insurance. A hybrid annuity plan can take a $100K CD or existing annuity and convert it into a $300K tax-qualified LTC policy. A tax-qualified will pay for care regardless the situation (whether it’s needed at an adult daycare, assisted living facility, nursing home, hospice, or at home). They pass all state and federal tax requirements so that disbursements made for care are not subjected to income taxes.
Hybrid plans also tend to have less underwriting compared to traditional policies. Clients whose application for a traditional LTCi policy has been turned down due to their medical history are often able to buy a hybrid plan. Hybrid LTC annuities necessitate the least level of medical underwriting. On the other hand, life insurance policies may need some more.
Better yet, most hybrid policies will allow joint ownership. That means you can just get one plan covering both spouses, as opposed to purchasing two traditional plans then linking them with a shared-rider. If needed, both spouses can simultaneously draw benefits.
Hybrid life insurance policies provide a tax-free death benefit to appointed beneficiaries if the funds are either partially or totally unused.
To sum it up rather, hybrid long-term care policies may provide significant benefits for people who are concerned about the sky-high costs of long-term care. Earmarked funds can be leveraged to build a larger pool of money while allowing the insured to regain control of their funds.
At Hybridlongtermcareplans.com, we specialize in asset-based LTC plans and can help you compare policies from the top 5 or 6 companies in the market today.