HYBRID POLICIES & LONG TERM CARE RIDERS
HYBRID LONG TERM CARE POLICIES
A hybrid is a combination of life insurance and long term care insurance that leverages the long term care benefit vs. the death benefit.
Key features of a hybrid products which vary from product to product
Return of Premium (at whim or at death)
Single Payment Premiums, Limited Pay Premiums, Lifetime Premiums
Cash benefit options
LIFE INSURANCE WITH LONG TERM CARE RIDERS
Life insurance products are leveraged for the death benefit. When a long term care rider is added, the value of the long term care benefit is limited by the death benefit and does not have an inflation benefit option.
Many permanent life insurance products now offer life a long term care or (a chronic illness rider ) rider. The riders come at an additional cost. Depending on the product and company, the long term care benefit may be a percentage of the death benefit at the time of purchase or at the time of claim.
Keep in mind that if the primary purpose of the life insurance benefit is to provide a death benefit, if the long term care rider is exercised, it is the death benefit that is being depleted to fund the care.
LIFE INSURANCE WITH CHRONIC ILLNESS RIDERS
Chronic illness riders are similar to long term care riders in the definition of qualifiers, but different in that typically the need for care is not intended to resolve, that the care need is permanent. Some companies have modified their definition of chronic illness riders so that the definition mimics the long term care definition. Contracts that have more open definitions for their care riders, typically require additional premium and additional underwriting to qualify for the rider.
Chronic illness riders that are a part of the base contract, with no additional cost, typically require an expectation that the care is permanent. However, because they do not require additional underwriting for the rider, people who may not qualify for a “long term care benefit” may slide through with the life underwriting and get the chronic illness rider.
ANNUITIES WITH LONG TERM CARE RIDERS
There are annuities with long care riders and annuities with added benefits that pay for long term care. The difference is in the tax deductibility of the long term care benefit when claimed. Long term care rider benefits are typically tax-deductible where as payments for long term care are not. However, when you need long term care the added income will most likely be off-set by the tax-deductions of long term care expenses.
Underwriting is much more lenient with the annuity combination products. Long term care riders with inflation protection regardless of the base product can greater leverage premium for long term care expenses.
Note: Not all long term care benefits apply to home care and assisted living. It is important to make sure when purchasing a product, that the long term care benefit is comprehensive.
HOME CARE CONTRACTS
A home care contract can be used independently or in conjunction with a long term care policy. The home care contract is very different and is NOT insurance. The contract is a purchase of hours of care instead of dollars to purchase care. The elimination period is met by counting of 90 days post application. The policy can be used for any new or exacerbation of a problem that requires you to need assistance with shopping, laundry, food preparation or daily living skills. The contract can only be used in a home or apartment not in independent living or continuing care community or any other facility. The contract provides up to 5 hours a day of care Monday-Friday. This policy is meant to enhance people’s ability to stay in their own home. It is not a replacement for long term care insurance. It can also be used for short term care, post-surgery, a pneumonia, post a fall, when someone is tired or limited and needs a little extra assistance. There is no underwriting or claims process. To qualify for the contract, one needs to be independent in all aspects of daily and community living. Diagnosis or adaptive devices are not exclusions.