Hybrid Policies

Estimates indicate that at least one-half of individuals over the age of 65 will need to enter a care facility at some time in their last years. The majority can’t afford long-term-care insurance nor can they afford to pay the expenses out of their own pocket. What are possible answers to this dilemma?

There was a time when insurance companies offered reasonably affordable insurance for this purpose that a fair number of older individuals could afford, but recently things have changed. Because of factors like the economic downturn and rapidly raising medical care costs, insurance companies have had to raise their premiums. They have lost customers, and some like MetLife Insurance Company no longer sell standalone long-term-care insurance.

1. About hybrid policies:

Many insurance companies are now beginning to offer something different. These policies are called hybrid insurance. They combine whole life insurance with a long-term-care rider or long-term-care insurance with a whole life insurance rider. According to Conning Research, this type of insurance is becoming a viable solution to the problem with standalone insurance.

2. The basics of hybrid insurance:

An example goes something like this. You might buy a hybrid insurance policy for life and long-term-care for $700,000. Then later down the road, you are in need of some long-term medical care. You can use some of the $700,000. If, on the other hand, you never have to use the policy, your beneficiaries will receive the funds after your death. Like other life insurance policies, during the time you are paying premiums, your money generally isn’t taxed. In addition, you probably won’t need to burden your children with paying for your health care, and your beneficiaries will receive any premium money that is left at your death.

3. Choosing the best hybrid policy:

Sales of hybrid life insurance and long-term-care insurance policies are increasing. It has been reported that in 2011, 2.2 billion dollars’ worth of hybrid insurance were sold, up by about 56 percent from 2010. Even so, increasing premium rates on long-term-care policies continue to be a problem in the industry. Companies such as Genworth Financial are planning to raise their premiums on standalone long-term-care by possibly 50 percent. Those wishing to buy or keep these standalone policies need to be aware of this trend.

4. Tips for those looking for hybrid policies:

a. The best time to buy a hybrid policy is when you are middle-age and still working. For individuals this age, a recurring premium policy may work best, and the premiums will be lower.

b. For older individuals who have some assets set aside for long-term-care may opt for a single premium policy at the beginning of the policy. Estimates indicate that this payment may be around $100,000.

c. Bruce Moon, VP with One America in Indianapolis, says a client can add a rider onto their existing life insurance policy by increasing the premium about 30 percent. This will provide long-term-care coverage and inflation protection benefits.

d. Before buying a standalone or a hybrid policy, you need to find out all the details about cost, coverage, and inflation protections – read the fine print carefully and ask questions. Coverage for various policies does not usually cover lifetime coverage if you happen to have a serious chronic illness. Many hybrid policies cover care for only three-four years. The one big plus for hybrid policies is that you have health protection, but if you don’t need it, your money will go to your beneficiaries.

e. Chronic disease is increasing among the elderly. If a client lives long enough and uses up all his long-term-care funds, his only choice is to go on Medicaid when his resources are nearly depleted.

Both insurance companies and the elderly face a dilemma about long-term-care insurance. With more chronic illness, economic uncertainty and increased medical costs, insurance companies have difficulty offering an affordable package. Hybrid life insurance combined with long-term-care insurance is becoming a workable solution. In most cases it is less expensive than standalone insurance, and if the funds aren’t used, they are passed to the beneficiaries.




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