Is a hybrid a good idea?

[easysurfer]

Gotcha! Not the kind of hybrid you were thinking about as in a car. But instead hybrid insurance for LTC.

Innovations ease bite of long-term-care costs - Robert Powell - MarketWatch

Since my LTC premium for my current coverage got increased by 23%, I'm reading about other possible options before deciding what to do.

 

[Midpack]

We have a Camry hybrid and we love it. We average almost 40 mpg summer and about 34 mpg winter. But we realize it'll take about 10 years to break even in the initial cost premium, so it's not a sound economic choice. However, emissions are indeed lower, that meant something to us. And at least it's a stealth hybrid in that it looks like any other Camry, whereas the Prius makes a more overt statement.

BTW, gotcha back...

 

[Brett_Cameron]

OP: Hijack!
DW has a 2007 Toyota Highlander hybrid. It has a big v-6 engine to augment the 43 kW electric motor. It gets 29 mpg in the city but only 24 on the highway. Not sure I would buy another hybrid unless the mpg was a lot better (ala Prius). Works for us.

Ok, back to LTC funding topic.

 

[easysurfer]

Okay..since the LTC hybrid serves a dual purpose, life insurance and LTC coverage, I guess this thread can serve the dual purpose of two hybrid topics

The car hybrid I'd really like is the Honda Fit Hybrid (want one that saves lots of gas, plus is a hatchback -- like the ability to load bulky items). Unfortunately, as of now, Honda doesn't plan on selling them in the United States and Honda is too afraid that a Fit Hybrid would take sales away from their Insight.

On the LTC, each way doesn't seem that great...

1) go without and self-insure (most can't afford that ) and hope that one stays healthy even in old age..against the odds.

2) if one qualifies, pay high premiums for a regular LTC policy

3) plunk down a large some like the hybrid LTC / Life insurance

4) go on medicaid for some coverage

5) head in sand and go in denial mode

 

[easysurfer]

A little more, with examples, on how the hybrid works:

The New Hybrid Long Term Care Health Insurance Policy

 

[TN_INVEST]

I think they can work for some folks.

Here's my initial thinking:

Most folks self insure anyway. Most folks do leave some money behind (might not be our financial goal to leave an inheritance, but it almost always happens). The lump sum premium policies are a way of making sure that money that gets inherited is passed without tax along with providing some extra benefit should you get sick (there are some that even have living refund provisions that allow you to cancel the whole darn thing and get your money back).

I know, I know...the money could be invested somewhere else...not really. If it is truly going to be used to self insure, then it needs to be in a liquid/conservative account...and you will never be able to withdraw any more money than is in the account (if you've got $90K, then all you can withdraw is $90) and then there is the tax issue.

Breakdown:
Money goes in to policy/contract
Money comes out in 1 of 3 ways (the amount that comes out depends on which option)
1. refund (what you put in is what you get out)
2. death (get something more than what went in)
3. income for LTC/sickness (total amount available is usually 2 times the death benefit available).
4. hybrid (get sick, then die). You would receive some income + there'd be some left for your beneficiaries. The amount varies, but essentially it's the death benefit amount minus any withdrawals.


I know a lot of folks hear the words long term care insurance and life insurance and they immediately shut down. The world has changed a lot.

 

[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.

 

[easysurfer]

I think a big advantage of a hybrid policy is psychological knowing that you or heirs can get some of the money you pay as premium back.

On a regular LTCI policy, it is tough writing a large check each year knowing that if you don't need it, that money is gone. Yes, that is the same for other insurance (auto, homeowners), but those checks are smaller and cover more immediate risk instead of LTC which may seem far in the future, if it happens at all.

On the flipside, it seems you need to commit pretty much in a hybrid policy to make the coverage worthwhile. For example, if you put in 100K and get the 3X coverage, that's up to 300K for LTC. But if you payed a LTC premium the traditional way, say at 2K a year, for 25 years that's only 50K premium you've put in.

 

[brewer12345]

On the flipside, it seems you need to commit pretty much in a hybrid policy to make the coverage worthwhile. For example, if you put in 100K and get the 3X coverage, that's up to 300K for LTC. But if you payed a LTC premium the traditional way, say at 2K a year, for 25 years that's only 50K premium you've put in.

And in both cases the charges for the LTCI coverage can double or more over time pretty much any time the insurer goes to the state and says "ooops, we goofed and need more money."

 

[SJ1_]

Gotcha! Not the kind of hybrid you were thinking about as in a car. But instead hybrid insurance for LTC.

Innovations ease bite of long-term-care costs - Robert Powell - MarketWatch

Since my LTC premium for my current coverage got increased by 23%, I'm reading about other possible options before deciding what to do.

A few years ago I looked into this.
I est. that 90% of my driving was hwy.
Looked at the diff. in gas mileage and the diff. in cost and could not justify it
from a cost point of view for gas savings.

 

[TN_INVEST]

I think a big advantage of a hybrid policy is psychological knowing that you or heirs can get some of the money you pay as premium back.

On a regular LTCI policy, it is tough writing a large check each year knowing that if you don't need it, that money is gone. Yes, that is the same for other insurance (auto, homeowners), but those checks are smaller and cover more immediate risk instead of LTC which may seem far in the future, if it happens at all.

On the flipside, it seems you need to commit pretty much in a hybrid policy to make the coverage worthwhile. For example, if you put in 100K and get the 3X coverage, that's up to 300K for LTC. But if you payed a LTC premium the traditional way, say at 2K a year, for 25 years that's only 50K premium you've put in.

For sure, I think it addresses that issue of "what if I never need it" (a normal response for health insurance coverage would be "count your blessings" but folks are funny when it comes to long term care stuff).

You need a pretty sizeable nest egg to really make these things work well. And it seems a lot of retirees have a psychological issue when it comes to recurring expenses (it's all about the income). Little old lady with $900K in CDs with a $1,800 monthly income will feel "poor" whereas a fella with only $150K and a nice $4,200 pension won't.

 

[easysurfer]

A few years ago I looked into this.
I est. that 90% of my driving was hwy.
Looked at the diff. in gas mileage and the diff. in cost and could not justify it
from a cost point of view for gas savings.

The hybrid car discussion is actually a good analogy for the LTC hybrid coverage. A large upfront cost for more peace of mind. Is it justified?

As for the car, it would be nice to know that from the point on (of after owning a hybrid) each time I drive, I'm saving on gas. Yet, is it justified from a cost perspective? The same thoughts, I suppose when considering, "Is it better to payoff my mortage early or not?"

 

[Nords]

I think the best justification for a plug-in vehicle (hybrid or EV) is being able to recharge it from a photovoltaic array.

One of our neighbors just bought a Leaf and added a few hundred watts to their array. Another neighbor (who also already has PV) is on the Leaf list. Once they've test-driven the car for a few years we might start looking for one on Craigslist.

Two other good justifications for a hybrid are that they're fun to drive and more mechanically reliable. I especially like the parts about no starter motor, no alternator, and 100K brakes.

But from the perspective of cheap fuel costs and without a PV array, I think a used Volkswagen diesel is probably ahead of anything with the words "hybrid" or "EV" in its description.

 

[Midpack]

Two other good justifications for a hybrid are that they're fun to drive and more mechanically reliable. I especially like the parts about no starter motor, no alternator, and 100K brakes.

We have a hybrid and it's been perfectly reliable so far, 4 years. But I've never seen the claim that hybirds are "more mechanically reliable," I would expect them to require more/expensive maintenance by virtue of additional complexity alone. I want to agree, but what is your "more mechanically reliable" statement based on?

 

[Nords]

I want to agree, but what is your "more mechanically reliable" statement based on?

The Prius' regenerative braking system means that the mechanical brake pads last over 100K miles. Our brakes were even ridden hard by a teen for over two years and still show little wear.

Our last few cars went through several starter motors and alternators each. Not a problem on a Prius.

The Prius engine is spun up by the motor generator before gas is injected into the cylinders, so the engine has much less mechanical wear & tear from its start cycle.

The Prius has a CVT instead of a manual or automatic transmission. You can't get much simpler than that, especially considering the quality of the average Ford Taurus automatic transmission.

Toyota explicitly warrants the coolant for 100K miles, although it's tricky to vent the system after changing it. But maybe all Toyotas have 100K coolant these days.

I'd like to think that A/C systems do better running off an inverter, but I'll have to get back to you on that in about five years or so.

 

[Midpack]

That's encouraging. We have an 07 Camry Hybrid, presumably the same tech as the Prius. I do see the original US Prii driving around from time to time, seems a good sign. Like you say, we will see...

 

[M Paquette]

I just saw a first generation Prius today, with 250,000 miles on it and still running well. So there's that...

 

[Nords]

I just saw a first generation Prius today, with 250,000 miles on it and still running well. So there's that...

I think that reassures people who fear its battery longevity. We'll never have that many miles on our two Priuses, but I hope we get 10-15 years out of them.

That's encouraging. We have an 07 Camry Hybrid, presumably the same tech as the Prius. I do see the original US Prii driving around from time to time, seems a good sign. Like you say, we will see...

Toyota Hybrids - PriusChat Forums

You might find a few helpful threads in there among the general "other hybrids" forum.

 

[easysurfer]

Enjoyed reading the discussions on the hybrids.

For the LTC, I'm leaning towards canceling my policy and kick the can foward. To invest the dough I would have plunked down on LTC premiums and in the future probably get one of those hybrid annuity/LTC policies. Hope this is the right move...only time will tell. Of course, in years to come, who knows what the landscape of LTC insurane will look like.

For the car hybrid, I'm sure sometime before I expire , I'll be driving some type of hybrid.

 

[TN_INVEST]

Enjoyed reading the discussions on the hybrids.

For the LTC, I'm leaning towards canceling my policy and kick the can foward. To invest the dough I would have plunked down on LTC premiums and in the future probably get one of those hybrid annuity/LTC policies. Hope this is the right move...only time will tell. Of course, in years to come, who knows what the landscape of LTC insurane will look like.

If anything, I think the definition of long term care is getting more expansive (started out as just nursing home care, now it includes all sorts of stuff). The whole trend sorta reminds me of those blue, handicap placards. When I was a kid, virtually nobody was handicapped.

 

[chinaco]

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).

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.

New: a hybrid annuity with LTC coverage - Yahoo! Finance

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).