The Wall Street Journal
Encore – May 4, 2014
‘Hybrid’ Long-Term-Care Policies
How to Tell If They’re Right for You
By Anne Tergesen
Buyers of long-term-care insurance are snapping up hybrid policies, which package long-term-care coverage with other forms of insurance. These policies allow heirs of consumers who die without using their long-term-care coverage to get at least a partial refund of their premiums, and are insulated from the premium increases that have given the insurance industry a black eye in recent years. But buyers need to understand the trade-offs involved.
Academic research shows that up to 70% of individuals 65 and older will need some form of long-term care. While Medicaid is available to help those with little money cover nursing-home costs, Medicare doesn’t pay for continuing care in nursing homes. Nor does it cover assisted living or home health aides, who provide help with dressing and other personal care for a national median rate of about $160 per eight-hour day.
Comments May 4, 2014
Insurance companies price policies based on their risk. There is a 7 in 10 risk you will need long term care if you live past the age of 65. There is a 10 in 10 risk you will die. Insurance companies charge more for Combination (Hybrid) policies than Traditional polices because they are taking on more risk.
Consider a 60-year-old man and woman who put a combined $150,000 into a hybrid policy with a maximum death benefit of $346,868. If either eventually needs long term care, the policy will pay $6,937 a month for up to 50 months (four years and two months) or a total of $346,868. If neither person receives long term care benefits, their heirs receive a $346,868 death benefit.
If the same couple were concerned about both or either needing an extended period of long term care, they could put a combined $174,244 into a hybrid policy with a maximum death benefit of $346,868. If either eventually needs long term care, the policy will pay $6,937 a month for each of their lifetimes, even if that means millions of dollars in long term care. If neither person receives long term care benefits, their heirs receive a $346,868 death benefit.
The same couple could each buy a traditional long term care insurance policy at a combined annual premium of $2,842. If either eventually needs long term care, each policy will pay $7,000 a month for up to four years or $336,000 per person (or a combined $672,000). Or they could pay a combined annual premium of $3,888 with a refund of premium option that would return all the premiums paid over their lifetimes upon death if they do not use the long term care benefits.
Since pricing can vary greatly between carriers, work with an independent insurance specialist that is contracted with numerous carriers. Let us research the market and design a long term care solution to meet your needs and budget at:
Aaron Skloff, AIF, CFA, MBA
CEO – Skloff Financial Group
Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA), Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at www.skloff.com or 908-464-3060.