Traditional Long-Term Care is valuable, if my health requires that type of coverage/services, but what if I never use it? This is a question many people have asked or think about when deciding to purchase Long-Term Care insurance. Some feel, that if they die without needing long-term care, they “wasted” their money!
The insurance industry recognized this concern and developed “Hybrid Life/Long-Term Care insurance plans to help eliminate these concerns! The long-term care benefits are very similar to the traditional long-term care plans. With hybrid policies, the consumer has the guarantee of long-term care benefits or, if no care is needed, the promise of life insurance benefits for themselves (accumulated cash value to supplement retirement or emergencies) and their beneficiaries (death benefit).
In the hybrid scenario, a policyholder would withdraw funds from the policy’s life insurance death benefit, when needed for long-term care. Some plans also include a rider to continue paying long-term care benefits after the life insurance death benefit has been exhausted. If the policyholder dies without using long-term care, the heirs receive the life insurance death benefit — therefore the premiums paid into the policy are not “wasted.”
Many of the Hybrid Life/Long-Term Care can be purchased with a “single” premium, 10 or 20 year premium payments or over the insured’s lifetime. Some people can utilize an existing asset, typically money you currently have in CDs, savings, annuities, IRAs, or retirement plan funds — as your guaranteed single premium.
Do you have an existing life insurance policy that you purchased to protect your family, and now they are on their own? The Pension Protection Act (PPA) allows a 1035 exchange of an existing life insurance contract for a new one that includes tax-advantaged long-term care beneﬁts. If you have accumulated funds in an annuity, it may also qualify for a 1035 exchange!
The PPA was passed by Congress in 2006 and became law in 2010. The act encourages individuals to buy Long-Term Care insurance by providing tax advantages to those who exchange existing annuities or life insurance for linked-beneﬁt annuity contracts or life policies that also provide LTC beneﬁts.
According to the US Administration on Aging, 70% of people turning 65 will need some form of long-term care in their lives. A hybrid insurance plan can help protect your assets if you are one of the 70%!
If you are interested in additional information, please email or call me and we can discuss!