By: Ben Mattlin
Roughly 260,000 hybrid policies were sold while only 66,000 traditional L TC plans were, says Catherine Theroux, a spokesperson for industry data cruncher LIMRA. Experts caution, however, that hybrid L TC isn’t right for everyone.
There are potential downsides, and not all hybrids are alike.
The reasons for the popularity of hybrids are manifold. First, while stand-alone LTC premiums have risen precipitously in recent years, hybrid premiums tend to remain stable, since most are paid up front. Second, it’s usually easier for clients to qualify for hybrid L TC coverage because the underwriting standards tend to be less restrictive.
But perhaps most important, hybrid policies solve for the “use it or lose it” problem. That is, clients will receive benefit one way or the other-either through a long-term-care need or as a death benefit, or both. Traditional L TC policies, on the other hand, only pay out if the client experiences a qualifying need. If that doesn’t happen, the years of premium payments are wasted.
Yet these combination plans have a downside. “Hybrids lack some of the customization of stand-alone L TC insurance,” says Suk Pau, vice president and managing partner at the Wealth Consulting Group in Cupertino, Calif. “A stand-alone product can let you set the benefit period or amount, whereas these are less flexible in hybrid policies.”
In advising clients about their LTC insurance options, Pau says it’s a good idea to ask what’s important to them. “What is your biggest concern?”‘ she says. This helps you find the product that best fits each client’s particular circumstances.