Every day between now and 2030 approximately 10,000 baby boomers will turn 65 years old. Discussing guaranteed solutions to pay for long term care is a conversation I have daily with clients throughout the United States. Most Americans age 65 and older will need some long term care at some point their lives. The most recent AARP study places your odds at a 52% likelihood of needing care. (58% for women, and 47% for men) 15 % of claims will last longer than 5 years. These are daunting statistics for you to consider.
Still, even acknowledging that you have a high chance of needing long term care, you might have found unattractive the prior LTC solutions available to you such as stand-alone traditional long term care policies.
Hybrid Long Term Care Insurance Compared With Traditional Long Term Care Insurance
Before the evolution of hybrid long term care insurance, the general way to insure against long term care costs was through the purchase of traditional stand-alone long term care insurance policies.
Traditional LTC policies are strictly utilization policies, similar to your auto insurance, homeowner's insurance, or health insurance. With these traditional LTC policies, your insurance is "use-it-or-lose-it." In exchange for an ongoing monthly or annual premium, you have coverage should you need long-term care.
Hybrid long term care (also known as asset-based) policies, in contrast, combine long term care insurance with an underlying cash value component, either life insurance or an annuity.
In addition to this "use it or lose it" proposition, traditional LTC policy premiums are not guaranteed. Your traditional LTC insurance company can change your premium if it needs a rate increase to maintain the solvency of its block of business.
And, over the years LTC insurance companies have increased premiums. Often. And in large percentages.
If you browse the internet you will see headlines everywhere about policyholder angst over soaring premiums. You will read about the difficult decisions policyholders needed to make about electing to pay the increases, cutting back on their benefits, or dropping their coverage altogether.
Against this backdrop the hybrid long term care policies were developed.
Hybrid Long Term Care Insurance Policies Provide You With Guarantees
You have worked hard to save for retirement so you can live comfortably in the future. You acknowledge you have a high likelihood of needing care. You want to prepare today to cover your future LTC expenses so you may protect your assets and not burden your loved ones.
All you ask for in return is for guarantees. This is a reasonable request for you. You want to know that your insurance company will not write your contract in pencil and retain the eraser in its shirt pocket.
Hybrid long term care policies provide you with the guarantees you are seeking not offered through traditional long term care policies.
Hybrid LTC policies provide you with benefits should you "Live, Die or Quit."
Your value proposition is clear.
Should You Live: If you need care, hybrid policies provide you with guaranteed tax-free long term care benefits to preserve your retirement assets.
Should You Die: If you die without needing care, hybrid policies provide you with a guaranteed death benefit - income tax-free- to your loved ones or charity of your choice.
Should You Quit: If your plans change and you change your mind, your hybrid policy will return to you the cash accumulation value or a percentage of your paid premium.
And, most importantly, hybrid policies provide you with guaranteed premiums.
It is these guarantees - premiums that never increase, LTC benefits that never decrease, cash value if you need it, life insurance for your heirs if LTC not needed, and the option to have your premium returned to you that has shifted the LTC insurance market to the hybrid model.
Hybrid Long Term Care Insurance - What You Need To Know
Hybrid long term care insurance is a general term and it will encompass any insurance policy that combines benefits of a life insurance policy with a long term care rider.
There are two types of "hybrid" long term care insurance policies that you need to be aware of.
1) Life Insurance Acceleration only hybrids >> life insurance focused
2) Life Insurance Acceleration + LTC Extension of Benefit hybrids & optional LTC inflation protection - >> LTC insurance focused
With the life insurance acceleration only hybrids, your main focus will be on leaving life insurance benefit to your heirs. The LTC Rider within these policies is an "oh, by the way" rider. So, the life insurance need is first and foremost for you, and the long term care need is a passing "what if I need care?" thought in your mind. With these policies you are maximizing life insurance, while minimizing long term care payouts.
With the Extension of Benefit hybrids, your main focus within your policy will be squarely on the long term care benefits. The life insurance benefit within these policies is the "oh, by the way" thought. It addresses your thought of "What if I don't need care?" Almost always you will minimize the life insurance within your design of these policies, ... and... you will consider maximizing your long term care benefits through not only the extension of benefits rider but also through the optional inflation protection you will have available to you.
If you are focusing on long term care planning, you will want to focus on these Extension of Benefit hybrids.
How Do You Design Hybrid Long Term Care Policies?
Hybrid long term care policies are designed exactly like traditional LTC policies. You can design your policy around your 3 benefit choices:
1. Monthly Benefit > how much per month do you want your policy to provide to you for your care needs, in today's dollars?
2. Benefit Period > how many years of coverage do you want? With hybrid policies, you may elect a range of benefit periods typically from 4 to 7 year benefit periods, or even a Lifetime Unlimited benefit period.
3. Optional Inflation Protection > do you want to increase your benefits to keep up with the rising costs of care?
Your answers to these benefit options will determine your premiums.
Now, you may also reverse engineer this equation as many of my clients elect to do.
Hybrid policies have flexible funding options available for your to fund your plan.
> Your policy may be funded with a single premium payment, or installment premiums over 5 years, 10 years, to age 65, or to age 95.
> You may use a tax free exchange of annuity or life insurance cash value.
> You may use an IRA rollover to fund your premiums.
If you are like many of my clients, you can request your illustrations not based upon benefits, but based upon your desired premium amount.
For example, you may want to see comparison illustrations for a single premium payment of $50,000 or $100,000. Or a premium payment of $10,000 over 10 years. Or a combination of a lump sum plus installment premiums.
So, whether you choose to design your plan around your benefits to derive your premium; or you elect to design your plan around your premium to derive your benefits, you will ultimately arrive in the same place.
Best Long Term Care Insurance Hybrids To Consider In 2020
Today, like the traditional LTC arena which has a half-dozen underwriters remaining, the hybrid long term care insurance arena is also a very concentrated space.
You will have 5 excellent underwriters presently with compelling overall which to find your best option.
These are the 5 primary underwriters for you to strongly consider today.
OneAmerica Asset Care and OneAmerica Annuity Care
The OneAmerica Care Solutions portfolio offers both life insurance and annuity based options.
The OneAmerica Asset Care policy has underwritten long term care benefits for 30 years. The Asset Care policy is a whole life policy with a LTC Continuation of Benefits rider. The OneAmerica Asset Care policy is the only hybrid LTC policy that offers Lifetime Unlimited long term care insurance benefit periods. The Asset Care policy may be purchased as either an individual policy or a joint life policy for couples. Inflation protection of 3% compound and 5% compound is available. IRA rollovers are also accepted to fund the Asset Care policy. The OneAmerica Asset Care policy accepts funding as a single premium, or installment payments over 5 years, 10 years, 20 years, or to age 95. If you want lifetime unlimited LTC coverage, this Asset Care policy is your best hybrid long term care insurance option.
The OneAmerica Annuity Care portfolio offers alternative options to obtain extended long term care coverage with benefit periods ranging from 5 years to Lifetime Unlimited. The OneAmerica Annuity Care policies will be helpful if you want to complete a 1035 exchange of existing annuity cash value. The Annuity Care policies also offer optional inflation protection of 3% compound or 5% compound.
Nationwide CareMatters II is one of two market leading cash indemnity hybrid policies. With cash indemnity policies, receipts are not required for you to receive your benefits. All informal home care from family and friends may be covered. Nationwide CareMatters II offers benefit periods up to 7 years. Inflation protection options of 3% compound, 5% compound, and a new Medical CPI indexed option are available. Nationwide CareMatters II accepts premium payments as a single pay, 5 pay, 10 pay or to age 100. Nationwide will retroactively refund policyholders 90 days of benefits once the 90 day elimination period is satisfied. Nationwide CareMatters II offers 2 Return of Premium options: a Maximum LTC, Minimum premium return option; and a Vested 100% Return of Premium option. The Nationwide Maximum LTC option is best, especially for women. If you want a 100% vested indemnity option, look to Securian.
Securian SecureCare is also a market leading cash indemnity policy. Like Nationwide CareMatters, Securian does not require receipts to be submitted for you to receive your maximum monthly LTC benefit. Securian SecureCare offers benefit period options up to 7 years although the 6 year benefit period is the best option for most everyone. The Securian policy makes available a 100% vested Return of Premium benefit for everyone. Inflation protection options of 3% compound and 5% compound are available. With Securian, 5% compound is an excellent option for most male applicants. The Securian policy is priced exceptionally well today for older age applicants greater than 70 years old. Single Pay, 5 Pay, 7 Pay and 10 Pay options are available. The Securian single pay option is priced best. If you want a multi-pay option, possibly look to Nationwide.
Lincoln Moneyguard III is a reimbursement model hybrid policy. Lincoln offers benefit period options up to 7 years. The Return of Premium with Lincoln Moneyguard III is 70%. Inflation protection options of 3% compound and 5% compound are available. Lincoln Moneyguard may be purchased as a single pay or numerous multi-pay options. With Lincoln Moneyguard III, the elimination period is 0 days in all settings. Please note: Lincoln Moneyguard III was repriced much higher to the marketplace in June 2020. For now, this policy might not be your best option.
The Pacific Life PremierCare Choice portfolio provides choices for policyholders through 2 Return of Premium options, as well as the choice of electing either reimbursement benefits or indemnity benefits at the initial submission of a claim. The Choice Max plan will provide maximum long term care benefits with a 70% Return of Premium that vests in 15 years. The Choice 100 policy will provide a 100% vested Return of Premium, while reducing the long term care benefits. Pacific Life provides benefit period options of 5 years to 8 years. The Pacific Life inflation protection options are 3% simple, 5% simple and 5% compound. Pacific Life offers single pay options, and multi pay options of 5, 7, 10, 15 and 20 years. Pacific Life is best designed as a single pay. The multi-pay options with Pacific Life are expensive and not very attractive. At claim time with Pacific Life you may elect a 100% reimbursement benefit, or you may elect a reduced indemnity benefit (76%-80%). The choice to receive the reduced indemnity benefits is irrevocable and can not be changed back to 100% reimbursement, once elected. If you want indemnity benefits, Pacific Life will not be your best avenue to obtain indemnity benefits. You will be overpaying by 25%. Look to Securian or Nationwide for their 100% cash indemnity plans. If you want 100% return of premium vesting, look to Securian.
2 Hybrid Long Term Care Policies to avoid in 2020
The Mass Mutual CareChoice policy is a single premium only policy that will provide you with a long term care benefit period of 4 years. Through the payment of non-guaranteed dividends you could increase your benefit period, possibly to to 4.5 to 5.5 years. The Mass Mutual CareChoice One policy offers an optional 5% compound inflation benefit, but Mass Mutual will setback your initial long term care monthly benefit to a significantly reduced amount if you do elect inflation protection. Your monthly long term care benefit will be structured to be the same at age 85 with or without choosing inflation protection. The CareChoice One policy is designed to not effectively address inflation. If you want greater long term care benefits, look to Securian, Nationwide, OneAmerica, Pacific Life, and Lincoln. If you only want greater death benefit, and do not care wheresoever about long term care benefits, you could consider Mass Mutual CareChoice One.
New York Life Asset Flex is a single premium policy that will provide you with long term care benefit periods up to 7 years. The NY Life Asset Flex policy does not offer automatic inflation protection. The NY Life Asset Flex policy only offers an outrageously expensive future purchase option. NY Life offers optional 5% compound inflation protection that must be purchased for additional graded increasing premiums in subsequent years. If you do not purchase the inflation protection each year beginning in year 3, you forfeit the right to buy the inflation protection. For the same premium outlay with New York Life Asset Flex you will be able to buy automatic inflation protection within your policy through Nationwide, Securian, Lincoln, Pacific and OneAmerica. These policies with automatic inflation protection built into your premium will provide you with significantly greater future long term care benefits than the NY Life policy will provide you.
Find Your Best Hybrid Long Term Care Insurance Policy
Hybrid long term care policies are exceedingly popular today. Long term care benefits if needed; return of premium through life insurance or cash value if you do not need care. There are a number of different policies for you to consider today. Your long term care planning objectives as well as your age, health status, and marital status, and state of residence may determine which policy is ultimately your best option. I work with all of your leading underwriters. To receive customized illustrations and experienced unbiased advice from the nation's top hybrid producer 2014-2020, please call me direct at (800) 891-5824. Or you may request information through my online quote request form.
Thank you for reading my blog.