Enter: Hybrid products or short term care insurance as a solution. These products joined the market in recent years to offer a similar but different solution than traditional long term care insurance. With these additional options available, you’re not limited to a “one-size fits all” approach to long term care planning.
Learn more about these two alternative options to discover if one may be better for you.
Hybrid Products
What is it?
A hybrid product packages life insurance or an annuity with long term care coverage. This option allows heirs of policy owners who die to receive a partial refund of premiums if the policy owner didn’t use their LTC coverage. They also bring guarantees to never have a premium increase.
Why should I consider it?
Hybrids may be a great solution for higher net worth individuals concerned with long term care planning. They often require a single, upfront premium ranging from a minimum $50,000 to $130,000 or more for average users.
Hybrids may also be a great choice for individuals with appreciated annuities or life insurance. In this case, they may transfer money from these policies tax-free to a hybrid through a 1035 exchange.
Is there a trade-off?
Yes. With hybrid products, your heirs receive a death benefit, but this option often provides less long term care assistance than a traditional policy. This may satisfy the burning question of, “Will I use it?” But it may not cover all your care needs.
Short Term Care Insurance
What is it?
Short term care insurance offers a shorter benefits duration (typically 12 months or less) and often provides a smaller daily benefit to offset the cost of care. These policies may be as small as $50 per day for three months.
Why should I consider it?
Traditional long term care insurance can be expensive leaving some families feeling like they have few options to plan for their future. Short term care offers an affordable solution to ensure a portion of your care needs are covered. It gives the family time to prepare financially in case care is needed for a longer period of time. At the same time, you’re saving money by paying a lower annual rate each year.
Is there a trade-off?
Yes. Short term care policies generally last for 12 months or less and some individuals may need care for a few years. A lower daily allowance may not cover all of your needs if you require extra assistance from a home health aide, assisted living facility, or nursing home care. However, if traditional long term care insurance is too expensive, it’s better to have some coverage than none at all.
To recap, there’s no “one-size fits all” answer to planning for long term care. It’s important to consider your options and choose the plan that works best for you and your financial needs. Don’t navigate these waters alone. Speak with a long term care specialist who can assist you in researching your options.
LTC Consumer is an independent, free online service to help consumers understand what long term care insurance is, how it works, and how to evaluate coverage options. Our mission is to provide an educational, no-pressure resource for learning about long term care planning, with the opportunity to speak with specialists who can help them.
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