Newer Products Take Diverse Approach to Long Term Care Insurance

With newer long-term care products on the market, now may be the time to start shopping for the future.
It does not matter what age you are, long-term care is something you need to think about. Just try not to leave it until the very last minute, when the expense will be much higher. The most critical thing to remember is that much of what you may need for long-term care is not covered by Medicare, which is a major mistake many older Americans make in thinking that it does cover them. Get busy sourcing some of the newer products on the market, as they are more cost effective.
Long-term care costs may run up to at least $80,000 a year, which is a significant chunk of money to find, even if you had funds stashed away. It could wipe out your savings in no time flat. However, with the latest line of combination insurance and long-term care products (dubbed hybrid life insurance), you might like the idea of investing a lump sum and choosing your long-term care coverage and death benefit.
The combo plans are not easily compared to individual, sole focus long-term care policies largely because the combination product is usually a lump sum investment. This approach to being covered for long-term care, if it is needed, is quite popular and sales of the combination products shot up to 62 percent in 2010. To put that into dollar terms, that would represent $1.2 billion according to the Life Insurance and Market Research Association.
Put another way, the new combination products symbolize about 6 percent of the individual life insurance market premium, and that even though older Americans (in their 60s) represented a large portion of this market, younger people were also interested. And why wouldn’t they be interested when they discover there are some very significant tax benefits to the payout of annuity values (and that includes contract gains), provided tax free under the Pension Protection Act of 2006.
How do you know which product to select? In the case of a long-term care policy on cash value life insurance, you would be able to control the specific term. Anything unused would pass to your named beneficiary, unlike regular stand-alone long-term care policies in which anything not used is not returned.
If you are interested in taking advantage of a tax deferred annuity, you might like the idea of investing a lump sum with a life insurance company, with part of the cash value being earmarked for long-term care benefits. Again, these are issues that are important to some and not to others. This is why it is best to discuss these issues with an experienced insurance agent.
You may decide the long-term care benefits are not as all-inclusive as those offered by a stand-alone policy. Or, for those with pre-existing conditions who cannot qualify for long-term care insurance, underwriting issues for the hybrid policies are not as rigorous. Additionally, you need to be aware that if you withdraw from a hybrid early, the annuities may be penalized twice – once by the IRS for taking funds out before you are 59 ½ years old and a surrender charge for early withdrawal (usually within the first seven years of the life of the product).

These products are complex, but for those who choose to plan ahead of time, it is well worth their while. It is time to call an insurance specialist and find out how these policies work.

Evan Tunis is with Next Exit Retirement. To learn more about Boca Raton long-term care insurance or West Palm Beach long-term care insurance, visit

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