Five Reasons to Buy Long-Term Care Insurance Instead of a “Hybrid”
If you’re healthy enough to qualify for long-term care insurance, you’re better off buying a long-term care insurance policy rather than a hybrid for five reasons:
- More benefits for each dollar of premium
- Federally-mandated consumer protections
- Protection of assets from Medicaid
- Tax-deductible premiums AND tax-free benefits
- Specially-trained insurance professionals
First, you’ll get more long-term care benefits for a lot less premium from the long-term care insurance policy.
Hybrids cost a lot more than long-term care insurance because every hybrid has a death benefit. If your main concern is planning for long-term care, you’ll get more long-term care benefits for less money with a long-term care insurance policy rather than a hybrid. Why pay for the added cost of a death benefit, when your concern is long-term care?
Second, you’ll get federally-mandated consumer protections when you buy a long-term care insurance policy.
Most hybrids do not have these consumer protections because most hybrids do not meet the federal requirements for long-term care insurance. For example, with a long-term care insurance policy, you have the right to have your policy reinstated up to five months after it has lapsed if you had a cognitive impairment at the time the policy lapsed. Most hybrids do not give you these federally-mandated consumer protections.
Third, hybrid policies do not protect your assets from Medicaid.
If your hybrid policy runs out of benefits you’ll have to use your own assets to pay for your care and then go on Medicaid. With a long-term care partnership policy, you can protect your assets from Medicaid even if your policy runs out of benefits. If you do buy a hybrid, buy one that has an unlimited benefit period. That type of hybrid can never run out of long-term care benefits.
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Fourth, long-term care insurance policies that meet the federal guidelines have tax-deductible premiums AND tax-free benefits.
Only two types of insurance have tax-deductible premiums and tax-free benefits: long-term care insurance and medical insurance. Hybrids do not have tax-deductible premiums because hybrids are life insurance and life insurance is not tax-deductible. (There is one hybrid where a portion of the premium is tax-deductible and we do recommend that hybrid for many of our clients.)
Fifth, only specially-trained insurance agents can sell long-term care insurance and long-term care partnership policies.
To sell long-term care insurance and especially long-term care partnership policies, insurance agents are required to take special training and update their training every two years.