The Pension Protection Act of 2007 paved the way for insurance companies to create life insurance and annuity policies that pay benefits for long-term care if they are needed. Just like traditional long-term insurance, these policies pay benefits for in-home care, assisted living facilities, and nursing homes. Unlike traditional long-term care insurance, premiums can never be increased and your beneficiaries receive a check for unused long-term care benefits after you die. Consumers are now snapping them up at a record pace. According to the Life Insurance Marketing Research Association LIMRA, in 2016, there was over 4 billion in product sales of Hybrid policies compared to 228 million in sales of traditional long-term care insurance. The catch with hybrids is they cost you more in the short run. Hybrid policies should be mixed in with an overall retirement plan versus just budgeting the annual premium as an expense.
In “The Complete Cardinal Guide to Planning for and Living in Retirement” Workbook edition, author Hans Scheil outlines 6 examples of hybrid policies offering similar long-term care benefits. One of the examples is shown below (Page 43):
This policy provides similar benefits to the traditional long-term care policy shown above. Since it is a single-premium life insurance policy, you pay the large premium up front, and if you do not use all of the benefit during your lifetime, your heirs will receive a benefit after you pass away. It only costs 9% more to additionally cover a male spouse the same age on a survivorship policy. The first $75,000 of benefits does not have 3% inflation. The second $75,000 of benefits has the 3% inflation rider. This policy has full underwriting with extensive health questions.
There are many options with hybrid policies and it can become confusing. For more explanation, pick up “The Complete Cardinal Guide to Planning for and Living in Retirement” and read Chapter 4 or the accompanying workbook and read Module 3. Cardinal Advisors can help you get the information you need to pick the right long-term care insurance plan for you or a family member.
Hans Scheil is the author of “The Complete Cardinal Guide to Planning for and Living in Retirement” and the accompanying workbook. He can be reached at Hans@CardinalGuide.com.
