Do these two products mix effectively and will they benefit you?
As the price of long term care insurance continues to rise, increasing by double digits each year, a number of families are beginning to seek out alternatives, which commonly includes a combination of life policies with the benefits of their LTC coverage.
However, the policyholders for these combination products are now also facing notable increases.
This fact, as well as the shrinking benefits that will be occurring over the next few months are causing many families to wonder whether this is the still right tactic. The cause of the shrinking coverage and rising prices is a new rule that impacts the form of life coverage that can be combined with long term care insurance riders. This will not only be affecting people who are buying the products for the first time, but those who already have the policies will also likely be seeing higher premiums.
These long term care insurance and life insurance policy combinations are known as hybrid products.
Over their years, their popularity has exploded, with an increase of 56 percent last year alone (according to the industry-funded research group, LIMRA). Among the reasons that they became so instantly popular is that they helped consumers to leap over one of the largest hurdles in long term care insurance; that this coverage could cause you to pay a great deal of money into it for many years, without ever needing to use it.
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However, by pairing its benefits with life policies, it allows a payout to be locked in for the policy’s beneficiary – such as a spouse, children, or another designated individual. This becomes possible regardless of whether or not the benefits of the LTC coverage are ever used.
Hybrid policies – like those of traditional long term care insurance – generally become applicable when the policyholder requires assistance with a minimum of two different daily living activities, such as bathing or eating. They either reimburse the expenses related to that care, or they provide a set monthly payout each month. They may not, however, provide coverage for cognitive loss and will frequently involve a notable waiting period before it kicks in.