Long Term Care Insurance Linked to an Annuity
Another example of these combination long term care health insurance policies links long term care benefits to a single premium deferred annuity. This product begins as an annuity with either a lump sum deposit or structured deposits made over time. If no care is needed, the annuity gains interest functioning like any other fixed annuity. But if the owner/annuitant needs care in a nursing home or elsewhere, a formula will be used to determine the amount of the monthly benefit available to the client. Taking the example used earlier, a healthy 65 year old woman who deposited $150,000 into this account would have the advantages of tax-deferred, safe growth in the annuity and approximately $4,700 a month of long term care benefits for 36 months. At an additional cost, a benefit rider added to this policy would provide the $4,700 monthly benefit for her lifetime. On these types of policies, the additional benefit rider is usually a wise purchase in order to obtain maximum guarantees.
The Latest in Long Term Care Hybrid Insurance Policies
The newest addition to the hybrid marketplace is the long term care annuity. This product also functions exactly like a fixed annuity, but has a long term care multiplier built into the policy. There is no premium rider attached to this medically underwritten annuity policy. Instead, a portion of the internal return in the contract is used to pay for the long term care benefit. Long term care coverage is calculated based on the amount of coverage selected when the policy is purchased. The insurance company offers a payout of 200% or 300% of the aggregate policy value over two or three years after the annuity account value is depleted. For example, a policyholder with a $100,000 annuity who had selected and aggregate benefit limit of 300% and a two year benefit factor would have an additional $200,000 available for long term care expenses after the initial $100,000 policy value was depleted. The policy owner would spend down the $100,000 annuity value over a two year period and then receive the additional $200,000 over a four year period or longer. In this example the contract pays $50,000 a year for a minimum of six years, but care will last longer if less benefit is needed. Again, if long term care is never needed the annuity value would be paid out lump sum to any named beneficiary.
Will a Hybrid Policy Work for You?
These scenarios are only basic examples of how hybrid policies work. That is to say, the coverage will be different from person to person depending on age, health, gender, premiums and benefits requested. In order to get an accurate proposal, an illustration would be required from the insurance company. These innovative products can meet consumer demands and provide more guarantees by combining traditional long term care insurance with the advantages of life insurance or annuity policies. Thus, consumers who utilize hybrid policies can avoid self-insuring against catastrophic long term care related expenses and have the peace of mind associated with a comprehensive plan.
A.M. Hyers owns and operates Ohio Insurance Plan. To learn more about long term care policies and other insurance products visit: www.ohioinsuranceplan.com
