Should you purchase a traditional long-term care (LTC) policy or a hybrid long-term care policy? This is a common question many ask when considering a long-term care insurance policy purchase. Unfortunately, the answer is not so simple. Each family has unique circumstances, and our recommendation will vary.
We always feel the natural starting point is a traditional LTC policy. It is still a viable option. There are many ways to craft a policy that is affordable. See our previous long-term care post here that shows you how to design a policy that keeps the cost down.
But there are occasions where a hybrid long-term care policy can make sense. Some individuals can’t fathom the scenario of paying insurance premiums for a LTC policy for many years, and never needing the policy. While this really is a good scenario, we completely understand. It’s a natural thing to want to get something in return for the money we pay all these years on insurance coverage. But for some reason we don’t get upset when we never file an auto insurance claim. And we definitely have no problem with not filing health insurance claims — that means we’re healthy!!
Enter the hybrid long-term care insurance policy. Wrapped inside of a permanent life insurance policy (whole life, or universal life), a tax-qualified LTC policy is included. These policies pay for the same services as a traditional LTC policy, and have the same triggers for benefits to begin. [Reference our LTC product page for a summary of the triggers (ADLs), cost of care information, and more.] At some point, we know the life policy will pay out a death claim. The LTC benefits might be needed — but if not, you can make withdrawals of the cash value, or surrender the entire contract and potentially get back all of your premium payments!
There are other reasons to go with a hybrid LTC policy. If you want to cover a husband a wife in one policy, only a hybrid LTC policy can provide that option. Additionally, if say a husband has poor health and a wife is healthy, it is easier to obtain an approval for LTC coverage inside of a hybrid LTC policy.
There is much more to this discussion, but take a look at the link below to view a great article on hybrid long term care insurance policies. These policies aren’t right for everyone, but should be considered when reviewing your options to address the very likely need for future long-term care services.