If you decide to buy a “hybrid” make sure it has these features
Excerpt from Scott’s newest book: “The Simple LTC Solution: How to Protect Your Life’s Savings with a Long-Term Care Partnership Program”
Fully guaranteed benefits
If you are considering buying a hybrid policy, you should only buy a hybrid policy that has:
1. A death benefit that is guaranteed through age 100 and
2. A long-term care benefit that is at least twice as much as the death benefit
First, the death benefit must be guaranteed through age 100. (The best hybrids guarantee the death benefit through age 120).
This is vitally important. If the death benefit is not guaranteed through age 100 then you could pay your premiums for years but end up:
• losing all the death benefit AND
• losing all the long-term care benefits AND
• losing all the cash value.
Here’s how to find out if the death benefit is guaranteed through age 100:
If an insurance agent or investment advisor is trying to sell you a hybrid policy, ask them to give you the complete illustration. It will be at least 10 pages long. Find the page in the illustration that shows, “Guaranteed Values”. That’s the ONLY page that matters.
The far-left column of the page should be titled “Insured’s Age”. Follow that column down the page until you reach the row where the age is 100. Follow that row all the way over to the far-right column entitled, “Death Benefit”. Make sure the “Death Benefit” is at least as rich at age 100 as it is the first year of the policy.
If the “Death Benefit” at age 100 is zero, don’t buy that policy. There are better policies out there with better guarantees.
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Long-term care benefits that are GREATER than the death benefit.
If you buy a hybrid the long-term care benefits should be at least twice as much as the death benefit. The best hybrid policies have unlimited long-term care benefits.
If you buy a hybrid policy that has long-term care benefits that equal the death benefit, you are not getting any leverage. You are overpaying.
Get a long-term care rider, NOT a chronic illness rider
Hybrid policies are life insurance policies combined with some type of a rider that allows the death benefit to be used to be paid to you before you die. There are two main types of riders:
Chronic illness riders and long-term care riders
Chronic illness riders do not meet the federal guidelines for long-term care insurance. Chronic illness riders, in some cases, may not pay benefits for care that would qualify for benefits under a “long-term care rider”. If you buy a hybrid policy you’re better off buying a hybrid with a long-term care rider, rather than a hybrid with a “chronic illness” rider.
Additionally, in order to sell a hybrid policy with a long-term care rider, insurance agents must take special training and renew that training every two years. Chronic illness riders do not require any special training.
Tax-deductibility of some of the premiums
If you can qualify for it, buy a hybrid that allows for the long-term care rider premiums to be tax-deductible. Most hybrid policies do NOT have any type of tax deductions.