What do you think of Hybrid LTC policies?

[MrLoco]

A little background. I am 57. My wife is 56.
I am retired. My wife still works but will retire in about 3 years when we will have 5 year health insurance at current employer rates. SO this should take us to Medicare eligibility.

We own our home ($250,000).No mortgage. No debt of any kind.

Investable assets of $4.5M with a 50/50 AA equities/fixed income.

Also assets are approx. 50/50 taxable/tax deferred (some tax free Roths).

We have pensions coming and will delay SS until 70. Combined pensions and SS at age 70 about $8,000/month.

Question is.....has anyone purchased one of the hybrid LTC policies? Unlike traditional LTC policies where you pay your premiums every year ....the hybrid products are really permanent life insurance with a LTC rider and offer a death benefit if LTC is never used plus a return of 80% or more of the premium paid if you ever want to cancel the policy.

The premium is paid at the start ...one time....and is steep......usually around $100,000. As an example from one sample contract....a 60 year old male, non smoker, who qualifies (based on current health/meds), for a single pay premium of $100,000 would receive a 6 year LTC Total benefit pool of $ 450,848 - first year - (monthly $5,808) , with a 3% compound interest inflation rider, would grow to a total pool of $790,565 (monthly $10,185) by year 20 (Age 80). Also if LTC benefits are never used, beneficiaries would receive a minimum death benefit of $139,400 so this is not a "use it or lose it policy." Also this particular policy has a surrender value of $80,000 in any year for any reason....so if you ever cancel for whatever reason....not a total loss.

Now I am not a fan of anything but term insurance but so many companies have dropped traditional LTC policies and those that haven't have increased premiums by 90% or more. Plus these policies are all of the "use it or lose it variety."

I like to hedge my bets. Maybe buy one of these policies for one spouse and self insure/pay for the other? We want to leave an inheritance for our children so a policy like this could help. Plus even though we have the funds....I would hate to shell out a million plus if both of us need extended LTC....especially dementia care which can extend for years.

Sure we could put aside a million for each of us for future LTC costs and leave the rest to the children but like I said, I like to hedge my bets a little. Plus the guaranteed death benefit to beneficiaries is attractive. And if I could preserve that much more of my estate for heirs, that is a bonus.

Anyone have one of these hybrid LTC policies? Are you happy with it? Did you take the inflation rider? Thanks for any opinions you can share.

 

[samclem]

COCheesehead has a hybrid policy like that (see link here and others), will hopefully chime in here. I think it is safe to say that most people here don't think it's a great idea for us (again, search these boards for plenty of feedbacl on why), but COCheesehead believes it is good for their situation, including some tax ramifications.

Plus even though we have the funds....I would hate to shell out a million plus if both of us need extended LTC....especially dementia care which can extend for years.

If you have the funds to cover LTC, then buying insurance is not a winning bet. Odds are against you coming out a net winner.

It would not be a good option for for me/us.

 

[COcheesehead]

PM sent.

 

[Dan A]

A little background. I am 57. My wife is 56.
I am retired. My wife still works but will retire in about 3 years when we will have 5 year health insurance at current employer rates. SO this should take us to Medicare eligibility.

We own our home ($250,000).No mortgage. No debt of any kind.

Investable assets of $4.5M with a 50/50 AA equities/fixed income.

Also assets are approx. 50/50 taxable/tax deferred (some tax free Roths).

We have pensions coming and will delay SS until 70. Combined pensions and SS at age 70 about $8,000/month.

Question is.....has anyone purchased one of the hybrid LTC policies? Unlike traditional LTC policies where you pay your premiums every year ....the hybrid products are really permanent life insurance with a LTC rider and offer a death benefit if LTC is never used plus a return of 80% or more of the premium paid if you ever want to cancel the policy.

The premium is paid at the start ...one time....and is steep......usually around $100,000. As an example from one sample contract....a 60 year old male, non smoker, who qualifies (based on current health/meds), for a single pay premium of $100,000 would receive a 6 year LTC Total benefit pool of $ 450,848 - first year - (monthly $5,808) , with a 3% compound interest inflation rider, would grow to a total pool of $790,565 (monthly $10,185) by year 20 (Age 80). Also if LTC benefits are never used, beneficiaries would receive a minimum death benefit of $139,400 so this is not a "use it or lose it policy." Also this particular policy has a surrender value of $80,000 in any year for any reason....so if you ever cancel for whatever reason....not a total loss.

Now I am not a fan of anything but term insurance but so many companies have dropped traditional LTC policies and those that haven't have increased premiums by 90% or more. Plus these policies are all of the "use it or lose it variety."

I like to hedge my bets. Maybe buy one of these policies for one spouse and self insure/pay for the other? We want to leave an inheritance for our children so a policy like this could help. Plus even though we have the funds....I would hate to shell out a million plus if both of us need extended LTC....especially dementia care which can extend for years.

Sure we could put aside a million for each of us for future LTC costs and leave the rest to the children but like I said, I like to hedge my bets a little. Plus the guaranteed death benefit to beneficiaries is attractive. And if I could preserve that much more of my estate for heirs, that is a bonus.

Anyone have one of these hybrid LTC policies? Are you happy with it? Did you take the inflation rider? Thanks for any opinions you can share.

As you stated, you are insuring your legacy. There are similar products that can insure a couple jointly and provide lifetime LTC benefits. Based on the ages you provided, $10,000/month LTC for either of your lives with $250K death benefit if care is not needed (used up first for LTC expenses first like the policy you described) would cost about $170K. No inflation protection, but a large initial monthly benefit. Crossover on the inflation rider is usually early 80s.

An uncommon but potentially interesting alternative is buying life insurance to replenish the estate. At the moment (and likely in the future) LTC expenses are tax deductible medical expenses which would offset an IRA distribution used to cover LTC costs. Very tax efficient.

The death benefit on the life policy would replenish the funds used for LTC. Often, a chronic illness rider that allows early access to the death benefit for a permanent (chronic) LTC situation is included. With 50% of your assets already in fixed income and life policy rates of return in the 3% to 5% at and a little beyond life expectancy, you wouldn't be giving up much, if any, in long term returns if the funding came from your fixed portfolio, but you would be covering the risk of early and long duration LTC impacting the spouse's lifestyle and size of the estate.

 

[joeea]

We own our home ($250,000).No mortgage. No debt of any kind.

Investable assets of $4.5M with a 50/50 AA equities/fixed income.

We have pensions coming and will delay SS until 70. Combined pensions and SS at age 70 about $8,000/month.

Sure we could put aside a million for each of us for future LTC costs and leave the rest to the children but like I said, I like to hedge my bets a little.

You haven't indicated what your monthly expenses will be in retirement.
But if I had the assets you have, I'd almost certainly self-insure.

I assume you have priced a LTCi policy and found it too expensive? If so, a hybrid policy is a reasonable alternative. That's particularly true if leaving a big legacy is very important for you. You could also consider self-insuring, but purchasing a life insurance policy which could replenish your legacy when you pass.

I have a LTCi policy with a 3% inflation rider. The cost is reasonable (at least for now).

 

[PJHawk]

Wondering if you decided on a Hybrid Plan and how it turned out. In same boat now.

 

[easysurfer]

You haven't indicated what your monthly expenses will be in retirement.
But if I had the assets you have, I'd almost certainly self-insure.

I assume you have priced a LTCi policy and found it too expensive? If so, a hybrid policy is a reasonable alternative. That's particularly true if leaving a big legacy is very important for you. You could also consider self-insuring, but purchasing a life insurance policy which could replenish your legacy when you pass.

I have a LTCi policy with a 3% inflation rider. The cost is reasonable (at least for now).

I had a traditional LTC policy but decided to let it lapse last year as over the course of about 10 years, got the choose between premium increase or less coverage. Now am considering a hybrid policy in the future.