Originally Posted by brewer12345
I have not seen the fine print on one of these hybrid policies, but I see no mention of the LTCI rider charges being fixed. That means these policies have the same problem as straight LTCI:the insurer can hike the cost at will.
I have not looked closely at one either. But this is the first generation of these products and I suspect they will evolve and change.
I would be a little concerned that all of the bugs have nit been worked out in the contract. For example one person states the LTCi covers more... used to be just for a nursing home. That was a double edge issue... insurance companies would not pay unless one went to a nursing home... then they learned, they could add a provision to pay less than the NH rate and benefit both the company (pay less) and the insured (less restrictive and more flexible).
This article provides a brief description of one of Genworth's products (an annuity... apparently there are life insurance hybrids also).
New: a hybrid annuity with LTC coverage - Yahoo! Finance
Genworth uses this clear-cut example:
A 60-year-old purchases a $50,000 long-term care annuity with 5 percent inflation protection compounded annually with a 200 percent coverage maximum and a six-year benefit period. So, his initial long-term-care coverage maximum is $100,000 -- double the premium he paid. (If he had refused inflation protection, then he could have chosen three times the premium, or $150,000.)
If he makes no withdrawals over 20 years at a 3.5 percent compound interest rate, minus administrative fees, he would have -- under the 5 percent inflation-protected scenario --$265,330 available in long-term-care insurance. Or a monthly maximum of $3,685.
If this person never needs long-term care, then the annuity can be redeemed for its accumulated value when it matures at 20 years -- or it can be left to accumulate further interest and the long-term care policy will remain enforce.
When this person dies, his heirs will inherit the greater of the accumulated annuity value, if there have been no withdrawals, or the single premium he paid initially less the amount of long-term care paid.
This example is probably not complete and may not be typical of all hybrid annuities... There could be more payments due. But the article makes it sound like a deferred annuity where the large up-front payment is part deductible and part insurance premium payment. But I suppose there could be additional periodic premium payments for riders.
This annuity description appears to require one to make a fairly large commitment upfront. But according to this article some of them may allow one to back out of the deal after a certain period or get their money and incur a surrender fee.
The article also indicates that the underwriting may not be as strict as traditional LTCi.
One interesting comment
was the last sentence in the quote (above). It appears that the product (in this example) might be setup to encourage the owner to not use the benefit for smaller claims. If it is used, (it appears) the heir suffers the loss of interest (according to this example) and instead get a return of premium minus benefits paid. One of those little "traps" that the spouse, caregiver or PA might not think about!!!
I think this just underscores that planning with insurance and even the use of it can sometimes be complex (to maximize the cost/benefit).