WTOP Interview: The Pros and Cons of Hybrid Long-Term Care Insurance

Interview Transcript:

Shawn Anderson: Financial News today to talk about! First, we want to tell you about what happened on Wall Street today. The Dow lost 832 points, that’s more than a 3% drop. The S&P down 94 again, more than 3%. The NASDAQ took the biggest hit, down 316 points, that’s more than 4%. More on this later on.

Hillary Howard: Well, let’s talk about finances and wellbeing. With roughly 10,000 baby boomers turning 65 each day, between now and 2030, finding solutions to pay for long-term care is a critical decision for you as premium costs continue increasing. One solution is a Hybrid Long-Term Care policy.

Shawn: Well, joining us live to talk more about this. Nina Mitchell, co-founder of Her Wealth and Senior Wealth Advisor at The Colony Group in Bethesda. Welcome back, Nina!

Nina Mitchell: Great to be back!

Hillary: Hi.

Shawn: Okay, so tell us, what is a hybrid long-term care policy and give us an idea of how it’s different from other long-term care solutions?

Nina: A hybrid long-term care policy, combines permanent life insurance, such as universal or whole life with an add on a rider for long-term care insurance, that allows you to accelerate or advance your death benefit during your lifetime to pay for qualified long-term care costs. And any unused death benefit will still be paid out to your beneficiaries just like a normal life insurance policy. These hybrid policies have become more popular because they help clients get over that “use it or lose it” shortcoming of the traditional long-term care policy. And with a hybrid policy, you’re basically guaranteed benefits either in the form of long-term care protection or a death benefit or a combination of both.

Hillary: So, there’s some upside there, are there any downsides to this?

Nina: Yes. I mean, there’s plenty of upsides; maybe besides, obviously just the guarantees, you got premium rates that are locked in, so you don’t have to worry about their future rising premium hikes that have been in the news. With long-term care, traditional long-term care policies. Also, as far as the downside as you were saying, well long-term care riders can be expensive, and you’ve got to really review them carefully because they’re really complicated. And I would say that a hybrid policy should not be your soul life insurance policy, if you really need to leave a death benefit to your heirs, because the long-term care pay-outs could completely wipe out your death benefit during your lifetime.

Shawn: Any other options we should consider when we’re reviewing these different policies?

Nina: Well, keep in mind that hybrid policies have various riders and all these riders need to be decided and priced at the time when you purchase your policy. So, here are some questions to ask yourself when you’re determining which features to look at:

  • Do you want an extension of benefits, which gives you a second bucket of money that you can use for qualified long-term care costs besides just the policy’s death benefit?
  • Do you want a cash indemnity or a reimbursement benefit for your claims?

And there’s a big difference between the two. Basically, a cash indemnity plan automatically pays your full monthly benefit without you having to submit any proof. And this could be really important if you want to use unlicensed family members to help take care of you. Whereas a reimbursement benefit, which is more common and less expensive, requires that you have proof for all your long-term care costs and the services have to be done by licensed caregivers.
And then lastly, you should ask yourself if you want to add inflation protection to increase your monthly benefits by 3 to 5%.

Hillary: All righty, Nina, thank you very much.

Nina: Thank you.

Hillary: That’s Nina Mitchell with The Colony Group. Of course, you can read more at WTOP.com, just search Her Wealth.