Catastrophic Long Term Care Insurance

We are often asked for a catastrophic long term care insurance (LTCi) policy or an LTCi policy with a long elimination period. Until just a few short years ago, those requests were simply unmet needs. But with the introduction of the hybrid life and hybrid annuity policies, the need can now be met!

Traditional LTCi policies have a maximum elimination period of 180 to 365 days. For your wealthier clients who have the means to fund a long term care event for a period of time, but who will encounter difficulties if that event lasts longer than a couple of years, these policies may be just the answer.

The Hybrid Life/LTCi policy combines a Permanent life insurance policy with a Long Term Care insurance benefit. Your clients’ dollars can do double duty: if they need money to cover the costs of long term care, they have it. If they never need long term care, the life insurance death benefit will be paid to their beneficiary(ies). If they use just a portion of the LTCi benefits, the death benefit remains at a correspondingly reduced amount. Added bonuses: the LTCi benefits are paid tax-free, and hybrids are less expensive than purchasing both a Life and an LTCi policy.

The Hybrid Annuity/LTCi policy combines a fixed deferred annuity that grows tax-deferred and an LTCi rider. Like most products and services that are bundled, the hybrid is less expensive than two separate policies. It covers your clients against the potentially massive costs of long term care and/or provides them with a pension-type income that can’t be outlived. And if they don’t use all the cash value, the remainder can pass to their beneficiary(ies). And the LTCi benefits are tax-free with this hybrid too.

Let’s take a look at John and Jane.

They have enough assets to pay for a couple of years of long term care without financial difficulty. (Note: the national average cost for one year in a nursing home is $94,170)

Their concern? What if they need LTC for longer than a couple of years?

The solution? A hybrid policy.

With both hybrid solutions, if John or Jane goes on claim they use their own money first (in the form of either reduced death benefit or cash values to their heirs), just as if they were paying for the LTC out of their own pocket (what we call self-insuring). Once their own money has been used inside of the policy, an LTC rider kicks in that continues paying for the long term care. And the pool of benefits inside that LTC rider will typically be somewhere between triple and quadruple the premium amount paid beginning day one.

How long a policy’s pool of benefits will provide LTCi coverage depends on the product and benefit period selected. Hybrid Annuity/LTCi products will have a total benefit period of 60 months to 132 months. With Hybrid Life/LTCi policies, your clients can select a benefit period from as short as two years up to an unlimited benefit period.

For the client who is looking for that “catastrophic” policy, the Hybrid Life/LTCi policy with unlimited benefits may be the ideal solution, offering the ability to self-fund the first two years of an LTC event with the policy taking care of the rest.

Do you want more information about Hybrid Life/LTCi or Hybrid Annuity/LTCi? Do you have a client you think would benefit from a hybrid? Please contact Jerry Skapyak.  

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