Should I Buy Hybrid Long Term Care Insurance?
Hybrid Long Term Care Insurance policies combine traditional Long Term Care Insurance with guaranteed Whole Life insurance. If you need long term care the policy works just like the traditional LTC plans and it will pay for home healthcare, assisted living, adult day care and nursing home care. However, if care is never needed, then the Hybrid Long Term Care Insurance policy will return principle plus interest back to the family at death in the form of tax free life insurance benefit.
Hybrid LTCI polices are plans that combine life insurance with long term care insurance coverage. Hybrid Long Term Care Insurance’s funding mechanism is different than traditional LTC plans. With Hybrid Long Term Care Insurance plans you pay either a one time lump sum premium, pay the premium over five years or pay it over ten years. If you pay the premium all at once you get more long term care benefits than if paid over ten years.
Another positive feature of Hybrid Long Term Care Insurance, also know as Asset Based Long Term Care Insurance, is the premium you pay is guaranteed to never increase. This means you have a set budget you can bank on as you age so you are never left scrambling to find extra money for a surprise premium increase.
Can My Hybrid Long Term Care Insurance plan have a premium increase?
Premium increases have been an issue for years with traditional LTC plans as some companies have raised rates double digits. It is like comparing any product in life… there are pros and cons to each type of long term care policies.
Hybrid LTCI policies not only offer life insurance with long term care coverage, but they also have a feature that allows the buyer access to their premium if they change their mind if they no longer want the insurance. This feature is called the policy’s cash value benefit. This is a moving number that generally gets larger and larger as the years go by. If you choose to opt out you will receive typically 80-100% of your premium back. How much of the premium premium you get back depends on the company.
There are around ten blue-chip Hybrid Long Term Care Insurance or asset based long term care companies on the market today. Each will have their pros and cons like with any product. Some will give more Long Term Care Insurance and less life insurance, while others will charge no fee if you change your mind.
What is the best source to get independent advice?
At LTC Tree we work with the all and help our clients drill down on these differences to determine which LTC product is best for their needs by using our pros and cons independent analysis.
What are the best Hybrid Long Term Care Insurance Products?
In no particular order the following are the top hybrid Hybrid Long Term Care Insurance products on the market today:
Securian Financial or also know as Minnesota Life Secure Care:
Their product is called Minnesota Life Secure Care and it has a balance of Long Term Care Insurance, Life Insurance if care is never needed and 100% of your money back after the fifth year if you change your mind. Minnesota Life’s Hybrid Long Term Care Insurance product will pay you direct 100% of the monthly benefit for you to spend how you see fit as long as at least $1 or more is spent on qualified Long Term Care expenses. Any money left over can be spent on anything you like or banked by you to spend on care later down the road.
Lincoln Financial Money Guard III:
Lincoln’s Hybrid Long Term Care Insurance has about 10% less Long Term Care Insurance benefits than Minnesota Life but will offer about a 20% larger initial death benefit in the first 20 years. After around age 82 the death benefits are pretty much the same for the two aforementioned companies.
If you change your mind and want to cancel the contract, Lincoln’s Money Guard III product will charge you a 20% fee. Lincoln’s product pays Hybrid Long Term Care Insurance on a reimbursement basis up to the incurred expenses and the care giver must be licensed. A unique feature of Lincoln’s plan is there is no 90 day elimination period like with some other hybrid LTC plans. Once you meet the requirement of needing help with at least 2/6 ADL’s or have a cognitive impairment such as Alzheimer’s the Lincoln Money Guard plan immediately begins to pay benefits.
Pacific Life Premier Care:
This product will give you less Long Term Care benefits than most other hybrid long term care plans, but will give you 100% of your benefits back to you will no fee at any time. With PacLife’s hybrid LTC plan, the death benefit is always equal to what you paid in.
These benefits like all other hybrid LTC plans are paid to you tax free in most all cases. The loan exception is if you have a massive plan around 300% more than the average premium a person put in the IRS may tax some of the benefits in those extreme situation. However, in out 25 years we have never had a client fall into that situation.
State Life – One America Asset Care I, Asset Care II, Asset Care III and Asset Care IV:
This product is the only Hybrid Long Term Care Insurance product that offers an unlimited benefit period. The product is based on two buckets of benefits. The first bucket will pay for 33 months of care on their most popular plan design and those Hybrid Long Term Care Insurance benefits will not be indexed for inflation during this first 33 month period. After the first 33 months, the second bucket kicks in the 3% compound will be factored into for your benefits for as long as care is needed.
The death benefit for couples is second to die which means it’s not paid until both spouses have passed away. This can be an issue if the person wants the life insurance to go to the surviving spouse to help pay any extra expenses they may need before they pass away. Again, it is like anything in life there are pros and cons to each company.
John Hancock Protection Universal Life with Long Term Care rider:
Their product will have the largest death benefit of the companies and you can use it for either Long Term Care or it will benefit death benefit. There is no inflation protection with this plan but John Hancock will start you off with the highest monthly benefit, but the benefits are NOT indexed for inflation.
After about a 25 year premium protection period John Hancock may have to ask for more premium if they have not been hitting their internal rate of return. They do have a guaranteed premium option that will give you less life and LTC benefits in exchange for that guarantee if one prefers that protection.
Nationwide Care Matters II:
Nationwide’s Car Matter’s II product offers a nice balance of Hybrid Long Term Care Insurance monthly benefits paid in CASH and life insurance in case you never use your LTC benefits. This means that the full benefit is paid to you once a claim is triggered and you can use the money however you see fit. That is particularly important in situations such as home health care. With Nationwide’s plan you can pay a friend, neighbor or independent home care aide direct. This takes out the agency middle man so you usually can pay this person less per hour which will stretch your benefits further.
The Nationwide Care Matters II product also offer a higher life insurance benefit than most hybrids so for those where the Life Insurance is most important this is one to study.
The elimination period with Nationwide’s plan is still 90 days but on day 91 they cut you a check and pay you back for the previous three months. For example, if your monthly benefit had grown to $10,000 per month in LTC benefits, Nationwide would send you a tax free check for $30,000 on day 91.
I don’t want to be harassed by a bunch of insurance agents, but I like the concept. What’s my next action step that will give me a comparison of my options and still give me space?
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