May 11, 2022
What if I don’t want a traditional long-term care plan? Last week, we covered the basics of traditional long-term care options. On this episode, I’ll continue my conversation with Nancy Simms and dive into the logistics of hybrid long-term care coverage and the Connecticut Partnership for Long-Term Care.
You will want to hear this episode if you are interested in...
- What is a hybrid long-term care policy? [1:14]
- Examples of life insurance policies with added long-term care [9:09]
- The tax-deductibility of long-term care plans [10:32]
- The underwriting process of long-term care plans [12:15]
- Looking at the logistics of hybrid long-term care plans [14:17]
- What is the Connecticut Partnership for Long-Term Care? [16:10]
- Starting the process of researching long-term care options [21:35]
Exploring hybrid long-term care options
There are essentially three different variations of a hybrid long-term care policy. The first is to have a life insurance policy that has an added long-term care rider. It works just like a normal life insurance policy that pays out in the event of your death. Except with the rider, it allows you to pay down your death benefit, dollar for dollar, to cover the costs of long-term care needs while you’re still alive. It’s a great way to add flexibility to a life insurance policy at a relatively low additional cost.
Another type of hybrid long-term care is what’s known as a linked benefit product. It’s a similar concept to the life insurance policy with a long-term care rider except that it accounts for inflation. Adding a long-term care rider to a life insurance policy will not increase the amount paid out based on the cost of care, making it more of an insurance product with added benefits and flexibility. The linked benefit is more like a long-term care product that has a smaller death benefit. A big advantage to this plan is if you never have a long-term care need, the majority of your premium will be returned to your estate through the death benefit.
Digging deeper
The final type of hybrid long-term care combines an annuity with a long-term care plan. Annuities are long-term investments issued by an insurance company designed to help protect you from outliving your income. They typically provide a guaranteed stream of payments over a predetermined amount of time. When combined with a long-term care plan, these annuity payments increase to cover the cost of a long-term care need.
When it comes to hybrid long-term care plans, the biggest benefit is flexibility. Plan beneficiaries can choose how to receive their benefits depending on the plans they select. A plan that pays through reimbursement works much like insurance. Benefits are paid out by submitting proof of long-term care services rendered. Indemnity (or cash) plans pay out a certain amount of money based on a daily or monthly limit. The major upside to this is that this money is paid out regardless of the actual cost of care so you could potentially receive more than you need. However, because the money can be used for anything, a potential downside is someone mismanaging the money. Listen to this episode for more information on long-term care plans!
Resources Mentioned
- 3 Ways to Cover Long-Term Care with Nancy Simm (Part 1), #95
- Connecticut Partnership for Long-Term Care