Long-term-care insurance isn’t dead, according to a 2018 Wall Street Journal article, instead it is being used as an estate-planning-tool. Today Americans are more interested in hybrid policies and these policies are reshaping the U.S. insurance industry.
When LTC insurance first came about in the 90’s, middle class Americans were insurer’s target market. Pitching policies that would hopefully save the average American from exhausting their life savings or depending on Medicaid or their children. Considering LTC insurance is important, once you hit your 50’s, but especially the costs. Waiting to buy insurance isn’t an option once you already have a debilitating condition- you wont be covered. But it’s a great financial commitment, so what happens if you end up not needing this coverage or only needing it for a short period of time? Well, one of the largest reasons LTC insurance sales have declined is due to the lack of premium returns in policies.
Now insurers are seeing some of their greatest opportunities in upper class Americans. This is because many of those people are able to afford LTC but are buying policies to protect their estates. LTC insurance is expensive- it’s an investment- but by planning ahead and putting a policy in place, early on, you’re giving yourself a safety net in the case LTC is actually needed. As I previously stated, you aren’t covered if you already have the illness and not having a policy in place can cause you to have to dip into your personal finances- which adds up faster than many think and can ultimately drain your savings.
Hybrid policies offer long-term-care benefits as well as potential death benefits in the case LTC isn’t necessary. Therefore most policies pay out 10-20% of the original death benefits even if LTC proceeds are fully tapped. More simply put, although you are shelling out a lot of monthly income for these policies, you are truly only paying a small amount in the case that LTC is needed and if it isn’t you are able to discontinue your policy without losing much of the money put into it. A hybrid policy is one of many options for those who recognize the need for LTC insurance but don’t want to risk the potential chance of being forced to pay higher premiums in the future. Probably the most attractive aspect to these hybrid policies, is a guarantee that rates will never be increased. Hybrid policies offer many benefits to those who want some sort of protection with the knowledge that they can have some life insurance protection, recovery options of premiums, and the guarantee that their premiums won’t escalate.
While much about these policies are attractive, there are a handful of disadvantages. One being you have a set amount of time to pay off that premium (many are around 10 years). Unfortunately many people don’t have that speedy income necessary to make these required premium payments in such a short time period. Another disadvantage of hybrids is that some of the benefits can be limited to between 60-70 percent of the actual costs. Lastly, there is no tax deductions obtainable for paid premiums. That being said, although there are great things about hybrid policies they aren’t for everyone so make sure you do your research.
If long-term-care is something you’re interested in investing into, I highly encourage looking into hybrid policies, making sure your policy has the option of “opting out” and premium returns in the case LTC isn’t necessary. Fill in the form below to get the quotes from the top ten companies FedEx’d to you.