In today’s market, there are solutions available that were not options in the past. Solutions such as using annuities and life insurance, solutions that allow you to use qualified funds from retirement plans or nonqualified funds from savings, money markets, etc.

Many people we talk with have initial misperceptions that:

  1. Long term care insurance is too expensive
  2. If you never use your long term care policy, all of those premiums have gone down the “long term care drain”.

There are policy types available today that are affordable and provide a benefit whether you need long term care – or not. There is also a return of premium if you change your mind and a guarantee that premiums will never increase.

Qualifying for long term care insurance is essential and, although you may have no health issues today, too many times a person has put off the planning process until the time comes when they no longer qualify for long term care insurance. Once this happens, choices become limited.

Two Types of Long Term Care Insurance Policies

  • Traditional Long Term Care Insurance
  • Hybrid Long Term Care Insurance

It is important to understand the differences between these two types of policies to determine which approach is best suited to your needs.

Traditional Long Term Care Insurance

With a traditional stand-alone long term care insurance policy, you elect your coverage at the time of purchase:

  1. Monthly Benefit ($3,000-$15,000)
  2. Benefit Period (2-6 Years) (Individual or Shared)
  3. Inflation Protection (3% Compound, 5% Simple, 5% Compound)
  4. Waiting Period (30-180 Days)

These elements can be custom-tailored to suit your needs.

Your premium is guaranteed renewable, meaning your coverage cannot be cancelled as long as premiums are paid. With traditional long term care insurance, your premium may be subject to rate increases. Premiums are typically paid on a monthly, quarterly, semi-annual or annual basis.

Traditional long term care insurance policies are similar to your auto and homeowners insurance. Premiums are paid for coverage. As long as premiums are paid you have coverage, but no residual value accumulates.

Because traditional long term care insurance utilizes a “pay-as-you-go” approach, your premium is typically affordable and can be budgeted into the years ahead.

You are able to design the policies to account not only for your current needs, but also to account for future inflated cost of care.

Hybrid Long Term Care Life Insurance

Unlike traditional long term care insurance policies that have a small annual “pay-as-you-go” premium approach, hybrid long term care life insurance policies with a long term care rider are often funded with a one-time, up-front single premium such as $50,000, $100,000 or $200,000. These policies can also be funded with deposits of $10,000 or $20,000 per year for a period of 10, 15 or 20 years. The deposit of premium dollars is very flexible and can be tailored to each individual’s situation.

The appeal of hybrid long term care life insurance policies is that you are guaranteed to receive your premium back should your life and plans change.

Also, premiums with hybrid long term care life insurance policies are fixed, guaranteed to never increase, and an extended benefit or lifetime benefit rider can be added to increase the protection beyond the value of the premium dollars invested in the life policy. These policies can be set up on a single individual or jointly on a couple, providing protection for both in one policy. Additionally, the impact of future inflation can also be built into these policies.

Hybrid linked-benefit long term care insurance policies will:

  • Pay for your long term care costs should you receive care
  • Provide your estate a tax-free life insurance benefit should you not need care
  • Offer you a 100% money-back guarantee should you change your mind
  • Provide extended long term care protection with a long term care rider

Hybrid long term care life insurance policies may be worthwhile for you to consider if you have liquid assets not needed for retirement income that can be easily re-positioned. Individuals with retirement assets and other assets to protect from the drain of long term care should consider the hybrid approach to protect those assets and their retirement lifestyle. These assets can come from qualified plans, existing whole life policies or annuities and offer tax advantages when re-positioned into a hybrid long term care insurance policy.

Hybrid long term care policies do not offer State Long Term Care Partnership Protection. However, those who have significant assets to protect are generally not concerned with the Partnership Protection provisions.

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