Should You Consider a Hybrid Long-Term Care Policy as Part of Your Long-Term Planning?

By: Anthony J. Enea, Esq.

I regularly meet with clients who are in their late 70's and/or early 80's and have not yet engaged in any long-term planning, such as creating and funding a Medicaid Asset Protection Trust. However, a small percentage of the same clients have surprisingly purchased some long-term care insurance coverage. While the amount and length of coverage purchased varies from client to client, the one important factor is that the individual has some level of coverage for either nursing home and/or home care. This coverage affords them the opportunity to take on the risk (even at a late age) of transferring their assets to a Medicaid Asset Protection Trust and/or to their children and incurring the five-year look back period (ineligibility period) for nursing home Medicaid resulting from said transfer.

Clients who have a traditional long-term care policy often express their concern that the coverage is a "use it or lose it" proposition. If you die never having utilized any of the policy benefits for either home care and/or nursing home care under the policy, you have lost all of the premiums that you may have paid.

Thankfully, there is now an alternative available. A hybrid long term care insurance policy allows the policy holder to access the benefit amount purchased for his or her long-term care needs (nursing home and/or home care), while at the same time having a cash death benefit available in the event he or she doesn't use the policy for long-term care. If the policy benefits have been used for long-term care costs, the death benefit will be reduced by the long-term care benefits paid.

While having this flexibility is advantageous, it comes at a cost; the hybrid policies are typically more expensive than traditional long-term care insurance policies. An additional advantage of a hybrid policy is that if the policy holder wishes to terminate the policy he or she can reclaim a portion of the premiums paid.

Clearly, the decision of whether to utilize a traditional long-term care insurance policy or a hybrid policy involves weighing many factors, such as cost, underwriting requirements, health and age of proposed insured, what long-term benefits are covered, etc. However, if one does a comparison and analysis of the insurers and coverage available, making a decision with respect thereto is not overly complicated. The assistance of a general agent can be invaluable in making this analysis.

I urge those interested in purchasing long-term care coverage to educate themselves as to the pros and cons of a traditional policy vis-à-vis a hybrid policy. I can assure you that in my experience clients with some long-term care coverage are in a much better position to be able to protect their life savings in the event home or nursing home care is ever needed. There is no substitute for advanced planning.