6 questions to ask before buying a hybrid life/LTC insurance

Are you thinking of buying a hybrid life insurance? Well, more people are opting to purchase hybrid life-LTC insurance since traditional LTC insurance comes with a lose-all risk.  Hybrid insurance is a combination of life insurance & LTC policy, which means you get a death benefit in the case you don’t need care.

Hybrid policies have become very popular among cost–conscious clients who need both life insurance and LTC coverage but do not want to purchase them separately.

Before purchasing a hybrid life insurance, there are questions you should consider asking yourself so you can decide whether it’s the right plan for you or not. These questions will also help you gauge whether a hybrid plan will best serve your needs.

Do I need a hybrid life insurance at this age?

These policies have a tendency of appealing to policyholders in their aged between 40 and 70 years old. Within this age, people start to get worried about incurring devastating long term care costs.

Relying on family when long-term care is needed is one of the last things one would want. Naturally, you want to have something to leave behind to your heirs when you’re gone. Incurring long term care costs can threaten your entire savings and put your beneficiaries’ inheritance in jeopardy.

If you’re convinced that you’re not rich enough to pay for long term care out of pocket, or at least from your assets, then you should seriously consider this form of insurance. If you feel that you only need life insurance, keep in mind that you can never be able to add an LTC rider much later.

How much are you able to save on insurance?

Generally depending on the company you buy from, a hybrid life policy will cost about 5% to 15% more compared to traditional life insurance plan.

Frank Chechel, a senior executive at Garden Life, says that hybrid policies are pretty cost-effective when compared to standalone policies, considered that you get a life/LTC combo.

Life insurance costs vary from one provider to the other. Buying this insurance when young and in good shape health wise allows you to pay much lower premiums. When a man is 30 years and his health is good he would pay below $13 monthly for decent coverage. That means you save a lot more on premiums.

What are the qualifications for a hybrid insurance?

Similar to an LTC policy or rather a traditional life insurance plan, a medical examination will be needed to ensure that you are qualified for the hybrid coverage. However, it’s much less thorough. Insurers may ask for your clinical records copies, your doctor’s statement and may request you to do a health exam.

Hybrid coverage gets you covered in the case you fall sick or are injured and thus require assistance to carry out daily duties such as taking a bath and eating.

In the case of any injury or illness and you need help, you usually have to wait for some time, like 90 days before the coverage falls into place. Keep in mind that hybrid policy insurance benefits are only activated when you’re unable to perform at least 2 out of 6 ADLs.

Do I need life insurance and long-term care insurance?

A lot of people want to save their families from financial distress upon their death, and do not want to be a burden to them when they are unable to take care of themselves.

A Genworth survey carried out in 2015 shows the $45,000 is the median cost for homemaker services. The average annual cost of adult day care services is around $ 18,000, over $43,000 for an assisted-living facility and $91,000 annually for a personal room in a nursing home.

If you own a hybrid policy and your long-term care benefit is not used, your heirs get your life insurance policy value.

If long-term care is needed you will get a portion of the value of the policy on a monthly basis. According to John Hancock, you may get up to 4% of the death benefit monthly.

What are the advantages and disadvantages of hybrid life insurance?

Sometimes it happens that you need long-term care for a very long time.  With some policies you can be able to draw down all your benefit, and the policy still pays out some amount (e.g. $10,000 or $25,000) to your appointed beneficiaries upon your demise.

With Nationwide’s long-term care rider, it’s possible to manage long-term care expenses and use it without limitations and you will still leave something behind for your heirs in case the rider’s benefits are not touched or completely used. Nationwide’s plan is designed such that the appointed beneficiaries receive the best of unutilized long-term care benefits or 10% of the due amount given by the policyholder due to guaranteed death benefits.

Although standalone long-term care policies cost are considered loss-risky, they have more options to choose from and often are more flexible compared to hybrid policies.

With the hybrid policies you have limited coverage for long term care expenses.

Have I done my homework before buying?

If you don’t have beneficiaries or have some assets your beneficiaries can depend on, you may need less to no life insurance.  If you are not in need of life insurance coverage, choosing a standalone long term care policy is recommended.

Asking for a sample policy so you can go through it and understand the information on long-term care provision is highly recommended. It is also essential to understand what will happen to the cash value of the policy if you need LTC.

If you can afford to separate life insurance policy and long-term care policy then, better yet. A hybrid policy is a usually works for people who want to avoid high insurance premiums.

Above everything, the most important thing is to figure out what you need, and take the time to research various policies and providers out there. That done, you’ll most likely get a policy that serves you well.

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