If you have hybrid life insurance with a long term care rider, you will be entitled to one of the following: (If LTC benefits are used): Accelerated LTC benefits + partial death benefit to beneficiary, (If LTC benefits are not used): Full death benefit to beneficiary. Some people look askance at these policies because, if they die without needing long-term care, they feel they’ve “wasted” the premiums. 8. It’s comforting to know you can often get most of your premium dollars back if you decide to cancel the policy after the surrender charge period ends. Nina Mitchell, a senior wealth adviser has some tips. 1. As with most forms of insurance, you … Finding solutions to pay for long-term care is a critical conversation to have while planning plan for a successful retirement. For some people, hybrid long term care insurance may not provide as much total LTC coverage as a traditional policy. Hybrid long-term care insurance is usually purchased through an insurance agent or broker. Taxation of benefits: Benefits received are typically tax-free up to the greater of actual qualified long-term care expenses or the per diem rate established by Health Insurance Portability and Accountability Act. Many people have been forced to cancel their coverage on traditional LTC policies due to. As standalone long-term care insurance becomes more expensive and harder to find, more consumers are turning to hybrid life insurance policies, which combine life insurance and long-term care coverage. A chronic illness refers to a condition with no medical cure such as heart disease, Parkinson’s, some cancers, etc. In conclusion, the most fundamental differences between hybrid and traditional LTC products are the premium guarantee and the existence of a death benefit. Chronic illness eligibility requirements: Same as above LTC requirements except for a permanent condition only (i.e., no potential for recovery from illness). We make it our mission to find the best long term care solutions for each and every client we serve. Any unused death benefit (from the first pool) will be paid out to beneficiaries at the time of the insured’s death. 7. Residual death benefit: Some policies pay a nominal (i.e., $5,000 —$10,000) residual death benefit or a guaranteed minimum death benefit, even if the entire death benefit was used for LTC needs during the life of the policy owner. Nina Mitchell is the Principal and Senior Wealth Adviser at The Colony Group and co-founder of Her Wealth. Every product is different, and a good agent will be able to understand all the differences and find the best available match for each individual client. Long-term care eligibility requirements: A licensed health care practitioner must certify the insured has a severe cognitive impairment or cannot perform at least two of six activities of daily living (ADL’s) for a period of 90 calendar days or more. Cons. The devil is in the details, so it’s important to understand the differences between a LTC rider and a chronic illness rider. Preferential tax treatment for repurposing existing life insurance and annuity policies via 1035 exchanges. As traditional LTC insurance becomes more costly, experience premium increases and are harder to qualify for, Hybrid LTC products are turning out to be a preferred option for consumers. Must Qualify For. © 2018 WTOP. This same eligibility criteria applies to stand-alone/traditional LTC insurance policies. If you never need the LTC benefits, you are guaranteed a death benefit higher than your premium; and if you cancel your plan, you typically receive all or most of your initial deposit back. Lincoln Financial Group is part of Lincoln National Corporation. Hybrid Long Term Care Insurance plans require an upfront premium of say $100,000 and if you need care you will have the same type of LTCI benefits of a traditional plan. You can also choose to partially self-insure by buying a policy with lower benefits, such as a longer elimination (waiting) period or a lower daily benefit. These plans are called combination life insurance. These linked benefit plans are also called “asset-based” LTC insurance plans and may be funded from different sources such as savings, retirement plans and 1035 exchanges from existing life insurance or annuities. This is another critical difference between hybrids and traditional LTC products. Upon filing a claim, the insured must submit a plan of care describing the LTC services needed to treat their illness and the plan of care must be recertified annually by a licensed health care practitioner. Premium rates are locked in, eliminating the worry of future rate hikes. The traditional long-term care insurance industry continues to struggle with high premium rate increases and fewer insurance companies willing to offer stand-alone or traditional policies. Why you should think twice about buying a traditional LTC policy. The primary advantages of these “hybrid” policies are that they offer tax-free reimbursements for qualified long-term care expenses; tax-free death benefits to your heirs if your LTC benefits are not fully used or needed; and a potential return of your premium if you change your mind down the road. All rights reserved. 5. Under this acceleration of death benefit, the LTC benefit received will reduce the death benefit dollar for dollar. Hybrid long-term care policies combine long-term care insurance with permanent life insurance policies that include a savings-investment component. How long benefits are paid depends on the payout option chosen when the policy is issued and how much you choose to take, among other factors. Benefit flexibility. In addition, some consumer protections (such as the ability to reinstate a lapsed policy) may not be available on a chronic illness rider. Nina Mitchell | @HerWealthTCG. Keep in mind that all riders, which are add-on features to enhance the underlying life insurance policy, must be decided at the time you purchase your policy and are factored into your total premium costs accordingly. Although hybrids are life insurance products, you may need a separate life insurance policy to fully cover your death benefit needs in case you exhaust the death benefit by taking money for LTC expenses. RELATED: 5 Ways to Fund your Long-Term Care Needs. Learn more about the crucial differences between traditional and hybrid long term care insurance. website is not intended for users located within the European Economic Area. Buying long-term care insurance will give you more control and independence, which in itself could offer a benefit by providing peace of mind. In addition to a death benefit, some hybrid policies offer a 'return of premium' option, specified cash surrender values, or a potential tax-favored income stream. This will be specified in the policy terms. Hybrid vehicles. Lincoln Financial Long-Term Care Insurance Review. A broken hip may generate payments under a LTC rider, but it would not qualify under a chronic illness rider because it is not a permanent condition. Added to these concerns is the push back from clients who are hesitant to spend thousands of dollars in premiums with nothing to show for their money should they never use their LTC insurance benefits.As a result, hybrid Life/LTC insurance policies — which … Unlike the first pool, this second pool is available only for monthly LTC benefits. Whatever you use for long-term care is subtracted from the death benefit when you die. As a result, hybrid Life/LTC insurance policies — which combine permanent life insurance with an accelerated death benefit rider that pays long-term care benefits — have been rapidly gaining popularity in addressing some of the perceived shortcomings of traditional policies. Care giving is expensive especially Long Term Care. Hybrid Long-Term Care Insurance Policies. Simply put, a hybrid long-term care policy combines the benefits of life insurance (or annuity) with long-term care benefits. This is why some of our clients purchase fixed payment hybrid long term care annuity and life insurance plans. Types of Long Term Coverage Riders. Give us a call at 1-866-365-6558 if you would like to learn more. Con: You might not qualify: Most long term care insurers require that you pass a physical before they insure you and somewhere between 15-20% of applicants are denied coverage. There’s a good chance you’ll need long-term care as you age. This Linked benefit life insurance with extension-of-benefits (EOB) rider: This policy with EOB rider offers two distinct benefit pools such that LTC benefits may be paid out even after the death benefit has been completely depleted. Monthly LTC benefit amount: Depending on the amount chosen at the time of application, a policy owner can choose a fixed monthly benefit or acceleration percentage (generally 2 — 4 percent) of the life insurance policy’s face value. 6. Reimbursement benefit vs. cash indemnity benefit: A “reimbursement” benefit requires evidence and approval of actual expenses before the receipt of the monthly benefit payment. But just like any decision related to long-term care, you need to carefully weigh the upsides and downsides of a particular payment method. Hybrid long-term care insurance is life insurance that has long-term care benefits.