Long Term Care Insurance: Traditional vs. Hybrid Plans
Long Term Care
Which of these popular solutions is best for you?
There are multiple ways you can secure coverage for long term care. Two of the most popular options are Traditional LTC and Hybrid polices. It’s important to understand what each type of policy provides.
Long Term Care Insurance Provides Options
There are many ways to pay for care when you need it and where you’d like to receive it.
Traditional LTC insurance is a standalone policy that reimburses you for eligible long term care services in exchange for a premium that, for most policies, can increase over time. Traditional policies exclusively cover LTC expenses in your home or a care center and typically provide the most robust LTC benefits, with almost all policies covering a combination of care at home and in an assisted living facility, nursing home, or adult day center. If you never need care, you’ll never tap into traditional LTC benefits.
Hybrid policies, which have become increasingly popular in recent years, combine either life insurance or an annuity with long term care coverage. Premiums are pre-paid as a lump sum (or over five-to-20 years) and are guaranteed to remain level. LTC benefits may be more limited than those of traditional LTC insurance, but your beneficiaries will inherit any partial or unused benefits.
| Traditional LTC | Life or Annuity Hybrids | |
| Affordability | Offers more robust benefits with more affordable recurring premiums | Offers robust benefits with good LTC leverage |
| Pre-Existing Health Conditions | Stricter health underwriting | May have more flexible health underwriting |
| Guarantees | Unless you pre-pay the premiums, premiums may increase in the future based on overall claims experience | Guarantees premiums and guarantees you will receive a benefit |
| Benefit Payout | Must file monthly claims to be reimbursed for eligible expenses | Many pay benefits as cash without requiring receipts, which also allows you to pay informal caregivers |
| Gender and Couple’s Pricing | May contain shared care riders that extend coverage for healthy couples | The extra cost for females is not as much as on traditional LTC |
| Tax Advantages | Both have tax-free benefits and first-dollar tax deductibility for business owners and Health Savings Accounts owners. Traditional LTC may allow Medicaid protection against asset spend-down. | |
This overview is just a guide. It’s important to consult with an LTC Advisor to review your situation. Our Advisors can help you design a strategy and determine which type of LTC policy could best help you achieve your financial goals. Schedule an appointment today.
