As Americans trend towards longer life expectancy, the need for long-term care (LTC) greatly increases. However, traditional LTC policies hold significant price increases and broach fear of "wasting" premiums if one dies without needing long-term care.
The new Hybrid LTC policies cover both life insurance and long-term care. The advantages of this policy are changing the way people plan as they age.
Hybrid policies reduce people's fear of wasting premiums by offering two exit strategies. In the first strategy, one receives most of their premiums back if the policy is cancelled after the surrender charge period (usually 10 years). Seemingly, this is a second chance for policyholders if they choose to cancel the policy.
The second exit strategy includes a comforting death benefit. The "use it or lose it" argument is seemingly put to rest as money one paid in premiums is paid to their heirs when they die. The eventual inheritance is worth the payment to many worried about the opportunity cost of paying hefty LTC premiums.
Another advantage of hybrid policies is that benefits are guaranteed. A plan will include a death benefit, guaranteed cash value and a guaranteed amount of long-term care coverage. These guarantees are not found in traditional LTC insurance policies.
Conversely, many traditional policies contain an annual five percent increase in compounded interest to keep up with the increasing costs of care. Because the life version of the hybrid policy gives policyholders a monthly death benefit payout when coverage is needed, the return is faster and possibly multiplied to pay for care.
Although hybrid policies are usually paid over shorter period and are not tax-qualified policies, the return on investment to one's heirs after death is a major draw for consumers looking at long-term care.