Since 2008, hybrid long-term care policies have been on the rise in popularity due to the flexible nature of these plans. Those who wish to avoid stand-alone policies due to rising premiums or price are beginning to shift to hybrid policies instead.
The New York Times discusses the matter further.
The Cassells decided on a universal life policy that included long-term care coverage. They paid a $97,000 lump sum with a fixed $4,800 annual premium. Unlike conventional policies for long-term care, theirs allowed them to tap into all the money paid in after seven years for any reason. The money grows with interest and is invested.
“It’s a triple threat,” Dr. Cassell said, “because it could be viewed as a fixed-income investment, cover long-term care and provide a life insurance benefit.”
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A hybrid policy for long-term care works by keeping a certain amount of cash within the policy.
The cash can later be used to pay for long-term care benefits. For a hybrid life plan, for example, you may pay a single premium of $100,000 and be entitled to $400,000 in payments for long-term care after a certain period. Many hybrid plans have such so-called surrender periods that put the money off limits for a certain number of years. A penalty is imposed if the money is withdrawn during that period.
Kevin Couper, a certified financial planner with Sontag Advisory in New York, says he recommends hybrid policies for clients with $3 million to $4 million in total assets, if they are seeking insurance for long-term care. With this kind of insurance, though, the insurance company gets quite a bit of cash upfront. Once you pay into a policy, the insurance company will be holding and managing the money, and it may be difficult to get it out in the short term because of surrender fees.
“Not all of my clients can write a $100,000 check,” said Kristi Sullivan, a certified financial planner in Denver, who advised the Cassells. “It’s not for everybody.” She said clients with $500,000 to $2 million in assets should consider the policies. Above those thresholds, it’s possible to self-insure, or cover the costs out of pocket. Below that range, clients could spend down their assets to eventually qualify for Medicaid.
Read more about hybrid long-term care policies in the full article here.
Photo by Pictures of Money via Flickr CC License
