Long-term care insurance: pricing and product options

In our previous post, we covered the basics of long-term care insurance. 
 
Today, we want to look at pricing and alternative products to traditional long-term care insurance.

PRICING
 
Okay, let’s look at the rates for the same policy we discussed in the previous post at various ages for nonsmokers in good health.
 
As a reminder, here are the basic policy features.

As far as pricing goes, the younger you are, the lower the premium. And premiums for females are higher than those for males. Furthermore, a couple applying together gets a discount.
 
Premiums are payable for life and is not guaranteed. So it can increase in the future. If you prefer a shorter premium payment period and be done with it, there is a product that allows you to pay premiums in one lump-sum or over 10 years. 

NONTRADITIONAL PRODUCTS: LIFE INSURANCE WITH A LTC RIDER

So far, we’ve talked about the “traditional” long-term care insurance. This is normally what we think of when we mention long-term care insurance.  
 
But beyond the traditional option, you actually have two other product types you can consider:

• Traditional life insurance with a long-term care rider
• Hybrid products (also called asset-based or linked products)

 
If you’re young-ish, you probably wouldn’t be too excited about the prospect of planning for long-term care. And you definitely won’t be interested in making premium payments year after year for benefits you might not need for a half century or more.
 
Half a century! Man, that’s a long time.
 
But still, it’s prudent to plan for it if it makes sense in the grand scheme of things.
 
If this is you, you might consider life insurance with a long-term care rider. This way, you get their life insurance coverage (which you probably need anyway) and build cash value.  
 
If you’re a parent and fortunate enough to make annual gifts to your child(ren), you might consider buying life insurance with a long-term care rider for your child(ren) in their 20s and 30s. if designed right, it can go a long way in helping them build a small nest egg for them in a tax-favored way without market risk.

NONTRADITIONAL PRODUCTS: HYBRID PRODUCTS

As for hybrid products, as the name might suggest, it’s a hybrid between long-term care and life insurance.
 
Premium structures for hybrid products are often more flexible. You can pay in one lump-sum over 10 years, to age 65, for lifetime, and so on. And unlike traditional long-term care insurance, premiums are guaranteed to never increase.
 
The question we often get asked is, “What if I pay make all these premium payments and die without every using the benefits?” Well, this may the product for you. With a hybrid product, there is a small death benefit should you never use long-term care benefits.
 
What’s more, you can design a hybrid policy so you can recoup your premium payments if you decide to cancel the policy in the future. It’s generally subject to a vesting schedule, so you have to wait a few years before you can recover your full principal.
 
In our next post, we’ll share with you what’s involved in underwriting and some sobering statistics. 

We do not provide legal or tax advice. Readers should consult their own legal or tax advisor. There is no guarantee investment strategies will be successful. Investing involves risks, including possible loss of principal. There is always the risk that an investor may lose money. A long-term investment approach cannot guarantee a profit. Investors should talk to their financial advisor prior to making any investment decision. This information is intended for educational purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, products, or services.