HYBRID LONG-TERM CARE POLICIES

The prospect of debilitating illness late in life is not a pleasant one, but it’s wise to protect yourself and your family from the financial hardships that could result from it. A common way to prepare yourself is by purchasing some form of long-term care insurance.

Long-term care insurance works like this: You pay an annual premium, and if you need long-term care due to age or illness, the policy pays out a daily or monthly benefit. Some people look askance at these policies because, if they die without needing long-term care, they feel they’ve “wasted” the premiums.

As a way to counter that, so-called “hybrid” policies have become VERY popular. These policies combine long-term care insurance with permanent life insurance policies such as universal life insurance (which, like whole life insurance, includes a savings-investment component that builds up over time).

In the hybrid scenario, a policyholder would withdraw funds from the policy when they are needed for long-term care, and the insurance company pays for care when those funds run out. And if the policyholder dies without having needed expensive long-term care, the heirs receive a death benefit — therefore the premiums paid into the policy are not “wasted.”

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