Long Term Care Insurance and Hybrid Insurance Options: Finding a Happy Medium for Your Clients

Long term care insurance policies have matured substantially, with numerous versions of the product having come and gone over the past 30 years. The first two decades of policy designs focused almost exclusively on long term care coverage, neglecting other insured risks. But recently, new hybrid trends have emerged that incorporate pure life insurance, annuities, or cash value into long term care coverage. Now, the industry is beginning to offer a blend of life, annuity/cash value, and LTC coverage.

How can you find the most appropriate solution for your client? Try fact-finding first to meet your clients’ needs, rather than jumping right in with a presentation on LTC coverage — this may reveal other insurance needs.

It’s helpful to understand that some clients may feel they will never need an LTCI policy and it doesn’t matter whether they’re denying that a long term care event will happen to them or if they believe that if it does, it won’t last long. Others may not want to devote cash flow dollars to a policy that covers only long term care because they may have a variety of insurance needs or already have competing cash flow constraints. Thus, bundling long term care and other coverage using a hybrid approach might be just the ticket for the skeptic or the client with limited resources who truly has more than one insurance need.

Inventory of existing policies and survivor analysis

First, take a thorough financial inventory of existing insurance policies as well as retirement and education assets, cash, other investments, and, of course, household income sources. Questions that delve into the client’s experience with families and friends who have gone through a long term care event with a loved one can help uncover which clients may be more sensitive to the need for long term care coverage and, in turn, more in tune with preparing for this kind of risk. Combining these steps with a solid survivor analysis can reveal if the client still needs life insurance, whether it’s short or long term, and how much they need.

The agent, now armed with plenty of in-depth information, can help the client choose between standalone LTCI policies, long term care policies with return of premium, life/LTC hybrids, or other combination approaches.

For the true skeptics, a return of premium rider

True skeptics may not respond favorably to the options you present, but it’s worth showing a traditional LTCI policy with a return of premium rider. This kind of approach typically returns the policy premiums paid to a named beneficiary, minus any benefits paid out for a long term care claim. The client then knows they’ll get something back one way or another, so they will be less likely to feel as if they’ve wasted premium dollars.

For someone with an ongoing sizeable life insurance need who also wants some long term care coverage in place – and, perhaps, who just doesn’t have the cash flow to pay for both – the positioning of a traditional life insurance policy with a long term care rider might work well. This approach most often reduces the death benefit when long term care benefits are paid out, but it could be a tradeoff the client is willing to make.