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Pros and Cons of Hybrid Long Term Care Insurance

Pros and Cons of Hybrid Long Term Care Insurance

 

elderly couple discussing hybrid life insurance

 

If you're considering purchasing a hybrid long term care insurance policy, you may want to understand exactly how hybrids differ from traditional LTC policies.

Here are some of the main advantages and disadvantages of choosing hybrid life insurance with long term care benefits:

 

Pros

 

Premiums are guaranteed not to increase.

  • This is perhaps the most significant advantage hybrid LTC insurance has over traditional LTC insurance. Many people have been forced to cancel their coverage on traditional LTC policies due to premium increases, and this is something you won’t have to worry about with a hybrid life insurance policy. 

 

You will receive a benefit from the policy no matter what.

  • This is another critical difference between hybrids and traditional LTC products. Many people are hesitant to purchase traditional LTC insurance because they know they will not receive anything from the policy if they never need long term care benefits. 
  • If you have hybrid life insurance with a long term care rider, you will be entitled to one of the following:
    • (If LTC benefits are used): Accelerated LTC benefits + partial death benefit to beneficiary
    • (If LTC benefits are not used): Full death benefit to beneficiary 
  • In addition to a death benefit, some hybrid policies offer a 'return of premium' option, specified cash surrender values, or a potential tax-favored income stream. These features are not available on traditional long term care policies.

 

There is a wider range of products to choose from

  • Many companies have pulled out of the traditional LTC market because the traditional policies aren't as profitable as they were projected to be. This is partly because people are living longer than the insurance companies initially predicted they would. 
  • The hybrid LTC market, however, is more diverse because there are so many different factors that companies take into consideration when designing a hybrid product. A good agent will understand all the different products and will be able to find the best available match for each individual client. 

 

Indemnity payout

  • Some hybrid products offer an indemnity payout for LTC benefits, which gives the policyholder more freedom over how the benefits are spent. If your policy offers an indemnity payout model, the insurance company will pay the benefits to you directly, and there is no need to submit receipts or applications for reimbursement.

 

Cons

 

Less total coverage

  • In many cases, hybrid long term care insurance may not provide as much total LTC coverage as a traditional policy. However, this depends on the individual, and the difference in the amount of coverage is often negligible. 
  • At Hybrid Policy Advisor, we provide quotes for both traditional and hybrid long term care insurance products. This allows you to see the difference for yourself and make an informed decision.

 

Less options for inflation protection

  • Traditional long term care insurance policies usually offer more inflation protection options compared to hybrid life insurance products. 
  • For example, traditional LTC policies may offer multiple rates for both simple and compound interest, while the options for inflation protection on a hybrid policy will be more limited.

 

In conclusion, the most fundamental differences between hybrid and traditional LTC products are the premium guarantee and the existence of a death benefit.

Both of these factors tend to make hybrid long term care insurance a safer and more attractive option compared to traditional LTC insurance. By purchasing life insurance with a long term care rider, you are able to secure LTC coverage without having to worry about future premium increases.

At Hybrid Policy Advisor, we provide quotes for both hybrid and traditional LTC products and make recommendations based on your specific needs and circumstances. We will work with you to find the best policy and walk you through the application process to ensure that you are satisfied with your choice.

Give us a call at 1-866-365-6558 if you would like to learn more.

 

 

NEXT - Part 3: Hybrid LTC: 6 Questions You Should Consider

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